Cleveland Fed President Beth Hammack stated on Thursday (February 27th) that the Fed may keep interest rates unchanged for a period of time to observe whether inflationary pressures fall towards the 2% target. She pointed out that the current monetary policy may have approached a neutral level, and the overall financial environment is loose, which provides the Federal Reserve with the space to "patiently wait".

The policy tone of staying put

Hamack emphasized that given the healthy job market and the slowing down of inflationary pressures, the Federal Reserve has the ability to remain patient, which may mean keeping the federal funds rate unchanged for a period of time. She stated that although inflation has made good progress, there is still a gap from the 2% target, and patiently waiting will help monitor economic performance.

Inflation Prospects and Risks

Hamak pointed out that although it is expected that the inflation rate will gradually decrease to 2% in the medium term, there is great uncertainty in this process, and the inflation outlook faces upward risks. She stated that before supporting a rate cut, more evidence is needed to prove that price pressures are falling and that the job market remains healthy.

Monetary policy approaching neutrality

Hamak believes that the current monetary policy is not very restrictive and may have approached a neutral level. She pointed out that the overall financial environment remains loose, stock market valuations are high, and stock risk premiums are close to zero. This viewpoint contrasts with the views of other officials at the Federal Reserve, who believe that monetary policy still has a restraining effect on the economy.

Regulatory and Economic Resilience

Hamak's speech also touched on regulatory issues, mentioning that the rising debt levels in the private credit and hedge fund sectors are worth paying attention to. In addition, she expressed confidence in the resilience of the US economy and believed that a high interest rate environment would not cause long-term damage to the economy.

Summary: The Federal Reserve patiently waits, while the market focuses on inflation and economic performance

Hamack's statement signaled that the Federal Reserve may pause interest rate hikes and hinted that monetary policy is approaching a neutral level. This stance provides relatively clear guidance for the market, but also highlights the uncertainty of the inflation outlook. In the future, the policy path of the Federal Reserve will depend on the speed of inflation decline, the performance of the job market, and the overall economic adaptability. Against the backdrop of loose financial conditions, the Federal Reserve's "patient waiting" strategy may buy more time for economic recovery, but the market still needs to be vigilant about the potential impact of rising inflation risks.

Hamack's statement indicates that the Federal Reserve may maintain interest rates unchanged for a period of time, and this "no action" stance may weaken market expectations of a rate cut for the US dollar, thereby providing support for the US dollar.