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FED: Cleveland's Hammack: Rates Not Far From Neutral, Upside Inflation Risks

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Cleveland Fed President Hammack's explanation of her dissent in favor of a hold rather than a 25bp cut at the December FOMC meeting (link) conveys that she "viewed my own decision as a close call".

  • She notes in a short essay that policy is "not far from a neutral stance" - this echoed language she employed in a December 6 speech. She writes: "Given the health of the labor market, it is important to maintain the focus on returning inflation to 2 percent in a timely fashion. To accomplish this objective, I believe that monetary policy will need to remain modestly restrictive for some time. Based on my estimate that monetary policy is not far from a neutral stance, I prefer to hold policy steady until we see further evidence that inflation is resuming its path to our 2 percent objective."
  • She noted she raised her inflation forecast vs the previous projections, and sees upside risks - compared to the FOMC Statement and Powell noting that the risks to the dual employment and inflation mandates are roughly in balance. She writes: "inflation remains elevated, and recent progress in returning inflation to 2 percent has been uneven...the balance of risks to the outlook appears to be skewed toward higher inflation outcomes. A stall in inflation above 2 percent for too long would risk de-anchoring inflation expectations, making it harder to return inflation to our objective."
  • While this is her last meeting as a voter until Cleveland's turn comes again in 2026, her dissent and general outlook indicate that she's among the most hawkish 4 or 5 members of the 19-member FOMC.
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Cleveland Fed President Hammack's explanation of her dissent in favor of a hold rather than a 25bp cut at the December FOMC meeting (link) conveys that she "viewed my own decision as a close call".

  • She notes in a short essay that policy is "not far from a neutral stance" - this echoed language she employed in a December 6 speech. She writes: "Given the health of the labor market, it is important to maintain the focus on returning inflation to 2 percent in a timely fashion. To accomplish this objective, I believe that monetary policy will need to remain modestly restrictive for some time. Based on my estimate that monetary policy is not far from a neutral stance, I prefer to hold policy steady until we see further evidence that inflation is resuming its path to our 2 percent objective."
  • She noted she raised her inflation forecast vs the previous projections, and sees upside risks - compared to the FOMC Statement and Powell noting that the risks to the dual employment and inflation mandates are roughly in balance. She writes: "inflation remains elevated, and recent progress in returning inflation to 2 percent has been uneven...the balance of risks to the outlook appears to be skewed toward higher inflation outcomes. A stall in inflation above 2 percent for too long would risk de-anchoring inflation expectations, making it harder to return inflation to our objective."
  • While this is her last meeting as a voter until Cleveland's turn comes again in 2026, her dissent and general outlook indicate that she's among the most hawkish 4 or 5 members of the 19-member FOMC.