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

Cleveland Fed President Beth Hammack has commented on the effects that further rate cuts could have on inflation. This comes amid uncertainty about whether the FOMC will make another Fed rate cut at the December meeting. Another rate cut is significant as it could provide a much-needed lift for Bitcoin and the broader crypto market.

Beth Hammack Warns Against Further Fed Rate Cuts

In her opening remarks at the Cleveland Fed’s 2025 Financial Stability Conference, Hammack stated that lowering interest rates to support the labor market risks prolonging this period of elevated inflation. She added that it could also encourage risk-taking in financial markets.

The Fed president explained that further Fed rate cuts in this environment could support risky lending, boost valuations, and delay the discovery of weak lending practices in credit markets. She further remarked that this means that whenever the next downturn comes, it could be larger than it otherwise would have been, with a larger impact on the economy.

There have been two 25 bps cuts this year as the Fed seeks to stabilize the weakening labor market. Hammack noted that this move is described as taking out insurance against a more severe slowdown in the labor market. However, she said that they have to be mindful that such insurance could come at the cost of heightened financial stability risks.

Hammack’s speech again raises the dilemma that the committee is currently facing regarding its dual mandate of inflation and the labor market as it decides whether to make another Fed rate cut in December.

As CoinGape reported, the FOMC minutes revealed that many Fed officials suggested that it is likely appropriate to keep the target range unchanged for the rest of the year based on their economic outlooks. It is also worth noting that, like Hammack, Fed President Jeff Schmid also recently warned that further cuts could have lasting impacts on inflation and do little to patch the cracks in the labor market.

Odds Of A Cut At The December Meeting Climb

CME FedWatch data shows that the odds of a December Fed rate cut have climbed to 44% today. This follows the release of the September U.S. jobs report, which showed the unemployment rate rose to 4.4%.

This marked a positive for Bitcoin and the broader crypto market as Fed Chair Jerome Powell said he was focusing more on the unemployment rate rather than the headline jobs number. As CoinGape reported, the odds of a December cut had dropped to as low as 34% yesterday after the BLS canceled the October jobs report and announced that the November jobs report will be released after the December FOMC meeting.

As such, this is one of the major employment data that the Fed will have to work with heading into the December meeting. Other such Fed officials, such as Fed President Raphael Bostic, have also warned against the inflation risk, which makes another Fed rate cut far from certain.