Two new voting members of the Federal Reserve announced on Tuesday that they favor keeping rates on hold for the near future, citing lingering inflation concerns. Their remarks came at a time when the central bank has already trimmed rates three times last fall and is watching closely how the economy responds.
Cleveland Fed president Beth Hammack said the policy framework is in a “good place” to pause rate hikes. She warned that inflation remains too high and has been moving sideways for more than two years, with a risk of staying around 3% for the rest of the year. Hammack stressed that she would need clear evidence of a price decline before considering any adjustment. Rather than “fine‑tune” the policy, she prefers a patient approach, noting that the benchmark rate is near neutral and that the risks of both a higher and a lower path appear balanced.
Hammack also highlighted the impact of tariffs, which have pushed up costs for many businesses. Some companies have already passed those costs onto consumers, while others anticipate further price increases. She pointed to rising electricity and health‑insurance prices and said it is still too early to determine whether these broad cost pressures have peaked.
Dallas Fed president Lorie Logan echoed Hammack’s concerns, saying she is “more worried about inflation remaining stubbornly high.” She noted that the three rate cuts last year, intended to protect the labor market, have increased inflationary risk. Logan said that if inflation eases while the job market stays solid, the current stance would be justified and no further cuts would be needed. However, if the labor market cools, cutting rates again could become appropriate.
Logan added that tariffs are still working their way through prices and that core services inflation—typically a key indicator—has remained flat. She remains unsure whether inflation will return to the 2% target by the end of the year.
On the employment front, Hammack observed that the labor market appears stable, with an unemployment rate of 4.4% and a balance between job seekers and vacancies. She expects recent rate cuts and fiscal support to spur business investment, leading to a stronger job market and a gradual decline in unemployment over the year. Logan agreed that the labor market is stabilizing and that downside risks have largely dissipated, noting that payroll growth has been steady since mid‑2025.
In context, the Federal Reserve last month left rates unchanged in the 3.5% to 3.75% range after the three cuts it made in late 2025. The new members’ call for patience reflects the broader uncertainty about whether inflation will move decisively toward the target and whether the economy can sustain growth without further tightening.
