Fed's Hammack: I see a lot of uncertainty in economic outlook
The desk interprets Cleveland Fed President Beth Hammack's recent remarks as reinforcing a cautious yet hawkish stance on monetary policy amid significant economic uncertainty. Per the full note source, Hammack emphasized the need for the Fed to maintain a neutral policy stance, citing persistent inflation pressures and the impact of geopolitical tensions, particularly the Iran conflict, on the economic outlook. This aligns with the broader narrative of a 'higher-for-longer' interest rate environment, as Hammack indicated that rates could remain unchanged for an extended period. The consensus among market participants appears to reflect a similar sentiment, with expectations for stable rates in the near term.
What the desk is arguing
The desk frames this as a signal that the Federal Reserve is prioritizing inflation control over immediate growth concerns. Hammack's comments highlight that while unemployment remains low, the persistent inflationary pressures are forcing consumers to make difficult financial trade-offs, which could weigh on demand. This suggests that the Fed is unlikely to pivot towards rate cuts in the near future.
Hammack, a 2026 voter, noted that the Fed has been missing its inflation target for years and that the current geopolitical climate, particularly the Iran conflict, could exacerbate price pressures. Her expectation that interest rates will remain on hold for 'quite some time' reinforces the view that the Fed is adopting a patient approach to policy adjustments, despite the uncertainty surrounding the economic outlook.
Where it sits in our coverage
Our consensus target for the EUR/USD is 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns with jpmorgan, which supports a stable rate outlook, while bofa presents a more cautious stance, suggesting potential downside risks to the euro. The desk's call is positioned at the upper end of the consensus range, reflecting a more optimistic outlook on the euro relative to the dollar.
How other firms see it
Firms like jpmorgan and goldman are aligned with the desk's interpretation, emphasizing a stable rate environment and the Fed's focus on inflation. In contrast, bofa and citi express concerns about potential economic slowdowns, advocating for a more cautious approach to rate adjustments.
Watch the EUR/USD trajectory as it mirrors the Fed's policy stance, particularly in light of Hammack's comments on inflation and consumer pressures. Additionally, keep an eye on the upcoming U.S. inflation data, as it will be crucial in shaping market expectations around future Fed actions.
Key takeaways
- 01Hammack emphasizes a neutral policy stance amid economic uncertainty.
- 02Inflation pressures and geopolitical risks are key concerns for the Fed.
- 03The Fed is unlikely to cut rates in the near term despite stable unemployment.
- 04Market consensus reflects a 'higher-for-longer' interest rate outlook.
Market implications
Traders should monitor the EUR/USD for potential movements influenced by Fed policy signals. A key level to watch is 1.075, which aligns with our consensus target, as market participants digest Hammack's cautious yet hawkish remarks.
Cleveland Fed Pres. Beth Hammack is speaking and says: I see a lot of uncertainty in economic outlook. Fed should be neutral and policy stance outlook given the uncertainty.
Higher prices are weighing on consumer's ability to stand. Iran war can impact both sides of Fed's mandate. There was a lot more consensus that it appears at Fed meeting Sees interest rates on hold for quite some time Sees low and stable unemployment right now.
Job market remains low higher/low fire environment. Fed has been missing inflation target for years. War means price pressures could be more persistent.
High inflation forcing more people toward trade-offs. Watching closely how long Iran war lasts excited for new Fed chair Warsh when he arrives inflation expectations remain well anchored to right now. High inflation could start weighing on demand.
Uncertainty over outlook should translate to policy uncertainty. Can't put hard number on how long Fed should hold rates steady. Hammack comments provide a cautious and modestly hawkish message, emphasizing that the Federal Reserve should remain patient and keep interest rates on hold given the high level of uncertainty surrounding the economic outlook.
She stressed that policymakers should maintain a neutral policy stance for now, noting that there was actually more consensus within the Fed meeting than many observers may have perceived. Her expectation that rates could remain unchanged for “quite some time” reinforces the broader higher-for-longer narrative currently guiding Fed policy. A major focus of Hammack’s comments was inflation.
She acknowledged that higher prices are increasingly weighing on consumers and forcing households into tougher financial trade-offs, while also warning that geopolitical risks — including the Iran conflict — could lead to more persistent inflation pressures. Although she described the labor market as stable, with low unemployment and a “low hire/low fire” environment, she did not indicate that economic conditions have weakened enough to justify rate cuts. Overall, the tone of her remarks suggests the Fed remains more concerned about inflation staying elevated than about an imminent slowdown in growth or employment.
Hammack is a 2026 voter. Recall at the last meeting that she voted to keep interest rates unchanged at the last FOMC meeting, supporting the decision to hold the federal funds target range at 3.50% to 3.75%. However, she dissented from the wording of the policy statement because she objected to language that continued to imply an easing bias — meaning the Fed was still signaling that future rate cuts were likely.
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