Fed Officials Push Back Against July Rate Cut as Inflation Concerns Mount

• Fed’s Cleveland President Beth Hammack says inflation remains too high for rate cuts and wants more data before supporting policy changes.

• Markets now see only a 4.7% chance of July rate cut while 95.3% expect rates to stay at the current 4.25-4.50% range.

• Fed Governor Waller and President Trump want rate cuts, but most officials prefer waiting for clearer inflation progress.

Federal Reserve Bank of Cleveland President Beth Hammack delivered a cautious message on monetary policy, stating that inflation remains too elevated to justify an immediate rate cut. Her comments come as markets increasingly price out the possibility of easing at the Fed’s July 30 meeting.

Speaking to Fox Business in an interview reported by Bloomberg, Hammack emphasized that policymakers need more evidence before changing course. “We’re not there yet on the inflation side of the mandate,” she stated, signaling resistance to aggressive monetary easing.

The Cleveland Fed president stressed the importance of patience as officials evaluate how new economic policies impact price stability. Her stance reflects broader concerns among Fed officials about moving too quickly and potentially reversing recent progress on inflation control.

Market Expectations Shift as Rate Cut Odds Plummet

Financial markets have adjusted their expectations following recent Fed communications. The CME FedWatch Tool shows a 95.3% probability that the Federal Reserve will maintain the federal funds rate at its current 4.25% to 4.50% range during the July meeting. Only 4.7% of market participants expect a rate reduction this month.

This dramatic shift in market sentiment aligns with Hammack’s cautious approach. Investors now view rate cuts as more likely in the latter half of 2024, contingent on improved inflation data and clearer economic signals.

The wait-and-see approach reflects the majority view among Fed policymakers. While two officials have hinted at potential support for rate cuts, most remain unconvinced that conditions warrant immediate action. Many want to assess the inflationary impact of current trade policies before altering the monetary stance.

Conflicting Voices Emerge Within Fed Leadership

Not all Fed officials share Hammack’s cautious outlook. Fed Governor Christopher Waller recently suggested that monetary policy may be too restrictive, raising the possibility of a July rate cut. Given current economic conditions, Waller argued that the Fed should consider easing this month.

President Donald Trump has also weighed in on monetary policy, calling for rate cuts of at least 300 basis points. Trump claimed that the Federal Reserve’s hesitant approach is causing significant economic losses for the nation.

Despite these calls for action, the prevailing sentiment among Fed officials favors maintaining current rates until inflation shows more sustained improvement. Economic growth continues steadily, but policymakers focus on achieving their dual mandate of price stability and full employment.