More Rate Cuts Could Keep Inflation Elevated, Fed’s Beth Hammack Warns

Core Viewpoint - Cleveland Fed President Beth Hammack has expressed opposition to further Fed rate cuts, citing concerns over prolonged elevated inflation and potential risks in financial markets [1][2][3]. Group 1: Impact of Rate Cuts - Hammack indicated that additional rate cuts could support risky lending practices and inflate asset valuations, potentially leading to a more severe economic downturn in the future [3][4]. - The Fed has already implemented two 25 basis point cuts this year to stabilize the labor market, but Hammack cautioned that this could heighten financial stability risks [4][5]. Group 2: Inflation Concerns - Hammack warned that lowering interest rates further could exacerbate inflation, which is currently at 3%, significantly above the Fed's 2% target [6][7]. - Other Fed officials, including Governor Michael Barr and President Jeff Schmid, have echoed similar concerns regarding the risks of rising inflation and the need for caution in monetary policy [6][7]. Group 3: Decision-Making Dilemma - The Federal Open Market Committee (FOMC) is facing a dilemma regarding its dual mandate of managing inflation and supporting the labor market as it considers the possibility of another rate cut in December [5][8]. - Recent economic outlooks suggest that many Fed officials believe it may be appropriate to maintain the current target range for interest rates for the remainder of the year [5].