Federal Reserve Unlikely to Cut Rates Before Spring, January Projections Shift

Cleveland Fed President Beth Hammack has indicated there is no immediate need to reduce interest rates, following three consecutive cuts totaling 75 basis points this year. As a result, prediction markets now show nearly an 80% chance that rates will remain unchanged in January.

Fed's Stance on Rate Cuts: Wait Until Spring?

In a Wall Street Journal interview, Hammack expressed no urgency to alter rates before spring, signaling a patient approach as January approaches. She emphasized that inflation risks outweigh labor market concerns and noted that tariffs continue to inflate goods prices. Hammack is looking for clearer signs of inflation aligning with the Fed's targets, a sentiment echoed by New York Fed President John Williams.

Currently, the Fed's policy rate hovers between 3.5% and 3.75%, which Hammack considers near neutral. She suggested that a tighter policy might better combat inflation, reflecting her conservative stance, crucial for upcoming policy votes.

Declining Odds for January Rate Cuts

Federal Open Market Committee members play a pivotal role in rate decisions. Recent market adjustments reflect a growing consensus against a January rate cut, with Polymarket data showing a 79% likelihood of no change. However, uncertainties persist, including potential changes in Fed leadership, such as Kevin Hassett's potential appointment as Fed chair.

Several officials have warned against rapid rate reductions to prevent inflation resurgence.

Impact on Markets and Crypto

Steady rates imply consistent borrowing costs for consumers and investors, influencing crypto and risk assets. Despite this, Fed's Chris Waller pointed out a weak labor market, potentially supporting further rate cuts.

While reduced odds of rate cuts may dampen short-term speculation, clear policy guidance could aid long-term market strategies, favoring predictability over sudden changes.