Fed Officials Signal Pause on Rate Cuts as Inflation Concerns Persist, Crypto Markets Adjust Expectations

Federal Reserve officials are signaling that interest rate cuts may be paused for the foreseeable future, as inflation continues to run above the central bank’s 2% target. Cleveland Fed President Beth Hammack recently stated that the Federal Open Market Committee (FOMC) could hold rates steady for some time, emphasizing patience as policymakers evaluate the impact of previous rate cuts and broader economic conditions. Her comments have influenced market sentiment, including among crypto traders, who are now scaling back expectations for aggressive Fed easing this year.

Speaking at an event in Ohio, Hammack noted that the labor market appears relatively balanced, reducing urgency for additional stimulus. However, she stressed that inflation remains “too high,” warning that price pressures could persist near 3% throughout the year. According to Hammack, the current federal funds rate is close to neutral, meaning it is not significantly restricting economic activity. This position, she argued, allows the Fed to wait and assess incoming data rather than rushing into further rate reductions.

Hammack was among the policymakers who voted to keep rates unchanged at the January FOMC meeting, reinforcing her stance that the Fed is well-positioned to maintain its current policy stance. Her cautious tone comes even as former President Donald Trump has signaled that his preferred Fed chair nominee, Kevin Warsh, would favor lower rates, adding a political dimension to market expectations.

Dallas Fed President Lorie Logan echoed similar concerns, stating that she is not yet convinced inflation is on a clear path back to 2%. Logan described the current monetary policy stance as appropriate and emphasized that additional Fed rate cuts would only be justified if inflation cools further alongside a more pronounced weakening in the labor market. As a voting FOMC member, her views carry significant weight.

Meanwhile, crypto traders are adjusting their outlook. Data from Polymarket shows expectations have shifted from three rate cuts this year to just two. With key economic data releases approaching, including the January jobs report and the upcoming CPI inflation report, markets remain focused on signals that could influence the March FOMC decision.