Cleveland Fed President: "Inflation is still too high... rates should be kept on hold for the time being"

Beth Hammack, president of the Federal Reserve Bank of Cleveland, drew a line in the sand, saying US inflation remains too high and there is no reason to change the current monetary-policy stance for the time being.

On the 6th (local time), Hammack said in remarks at a US monetary policy forum in New York that the Fed must "strike a balance between high inflation and a cooling labor market," adding that "following last year’s rate cuts, monetary policy has reached a good position where it is exerting a neutral influence on the economy."

Hammack, who has a vote on the Federal Open Market Committee (FOMC) this year, said, "My baseline scenario is to maintain the current monetary policy for a considerable period until we see evidence that inflation is declining and that the labor market is further stabilizing." She added, however, that "since other scenarios are easy to imagine, two-way risks to the rate outlook remain open."

Previously, the Fed cut the benchmark interest rate by 0.75% points last year to 3.5–3.75% to cushion a cooling job market. But Hammack is said to have been skeptical about the cuts even then, citing inflation running well above the Fed’s 2% target.

Complicating the Fed’s calculus further, concerns about "sticky inflation" are rising again as energy prices have surged following President Donald Trump’s strike on Iran. Hammack likewise noted that "upward pressure on prices is broad-based," pointing to "major cost concerns for companies not only from tariffs but also from increases in health-insurance premiums and electricity bills."

Meanwhile, Hammack devoted a substantial portion of her speech to explaining the US dollar’s entrenched status as the world’s reserve currency.

She asserted that the dollar’s dominance is underpinned by America’s strong institutions and legal system, and that there is currently no credible challenger capable of replacing it. She also said the rise of stablecoins in crypto-asset (cryptocurrency) markets—whose value is pegged to the dollar—could, if anything, further spur global demand for the greenback.

"It is hard to imagine a major shift in the dollar’s international role in the near term," Hammack emphasized, "because the more people use a particular currency, the stronger the network effects become and the benefits grow exponentially."