Cleveland Fed's Hammack says rates likely on hold 'for quite some time'

Cleveland Federal Reserve President Beth Hammack said on Wednesday that US interest rates are likely to stay on hold for an extended period. She cited sticky inflation, the Iran war and an “inflationary mindset” she sees taking root among American businesses.

Hammack made the comments in two appearances in Ohio. In a WOSU public radio interview and at the Ohio CEO Summit in Columbus, she pushed back on expectations that the next move from the Federal Open Market Committee would be a cut. “My outlook right now is that interest rates will be on hold for quite some time,” she told WOSU. “Based on what I see right now, I see a lot of uncertainty in the economic outlook.” She said the FOMC’s policy statement should carry “a pretty neutral stance about whether the next move is down or up or just on hold for a really long period.”

The Fed kept the target range for the federal funds rate at 3.5 to 3.75 per cent at its last meeting on April 29. Hammack dissented from the policy statement. She was joined by Boston Fed President Susan Collins, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan, who all opposed language signalling a likely rate cut as the next move. The four-way dissent was the largest bloc at a Fed meeting since 1992, according to a Reuters account carried by Yahoo Finance. The dissent landed against the same energy and tariff backdrop that has pushed CPI back above 3 per cent and complicated the case for any near-term cut.

What Hammack told the room

At the Ohio CEO Summit, Hammack said her concern is that price expectations are starting to harden in business decisions. “What I hear when I’m out with businesses is I hear concern that an inflationary mindset is starting to become entrenched,” she told the audience.

She traced it back to a five-year run of overshoots. “We have been missing our 2 per cent objective for the past five years,” Hammack said, “and with the pressures that we see right now coming from the conflict in Iran, it could mean that those pricing pressures are going to be more persistent,” per a MarketScreener summary of her remarks.

The 2 per cent target has not been hit on a sustained basis since 2020. Pandemic shocks blew it open. Russia’s war in Ukraine kept it open. Now the Iran conflict and a fresh round of tariffs have done the same thing again.

That, Hammack told the room, totals roughly a decade of 2 per cent inflation crammed into five calendar years. Businesses, she said, are starting to bake the resulting price arithmetic into their planning. Wage rounds and supplier contracts are following. The risk, in her telling, is that a string of one-off geopolitical hits hardens into something the Fed has spent a generation trying to avoid: a self-fulfilling expectation.

Why the dissent matters

Hammack framed her vote as part of a broader debate inside the committee. She told WOSU there was more consensus among officials than the dissent count suggested, but argued the statement language overstated the case for an imminent cut.

For traders, the four-name April 29 dissent is the operative read. Collins is leaning on stubborn services inflation. Kashkari has stayed focused on supply-side persistence. Logan keeps coming back to a labour market that is still tight by historical standards. They got to the same procedural “no” by different routes, and lining up with Hammack pulled the committee’s centre of gravity away from the cut path that Fed funds futures had priced earlier this year.

Hammack herself was careful not to sound like a hard hawk. “I think we have pressures coming on both sides of our mandate,” she said, referring to the Fed’s twin objectives of stable prices and maximum employment. The labour market, in her words, is in a “low-hire, low-fire equilibrium”. The banking system is performing well. None of that, she argued, looks like a setup that calls for stimulus.

What’s next

Next FOMC meeting: June. Rate-cut expectations have whipsawed for months on every oil tape and tariff print. Wednesday’s comments push the bias further toward a longer hold. The June dot plot is the next set-piece for repricing.

Her own reaction function, Hammack said, is currently weighted to the inflation side of the mandate. Surveys and market-based measures of inflation expectations are still anchored. But she sees the geopolitical layer added by the Iran conflict pressing on prices for longer than the Fed had penciled in at the start of the year. Her base case: policy rate sitting “around this level” for an extended period.

Hammack votes through the end of 2026. The dissent is on the record. Before the June FOMC, two prints will move the curve: May CPI on June 11, then the May jobs report on June 6.