Two Federal Reserve voting members this year expressed hawkish views on Tuesday, suggesting interest rates are likely to remain unchanged for an extended period unless new, substantial signs of weakness emerge in the U.S. labor market, to avoid rekindling inflation.

Cleveland Fed President: Rates Could Stay Unchanged for Some Time Cleveland Fed President Beth Hammack stated that interest rates may remain steady for a longer duration as Fed officials assess incoming economic data. Hammack said on Tuesday, "Rather than attempting fine adjustments to the federal funds rate, I prefer to maintain patience, observing how the economy performs while evaluating the impact of recent rate cuts. Based on my projections, we are likely to stay on hold for a considerable period."

Hammack has repeatedly urged her colleagues on the Federal Open Market Committee (FOMC) to proceed cautiously with rate cuts to prevent a resurgence of inflation. She supported last month's decision to hold rates steady following three consecutive cuts in late 2025.

Hammack shared a "cautiously optimistic" outlook, noting that fiscal support, lower rates, and other factors would fuel U.S. economic growth, thereby boosting the labor market. She expects inflation to moderate this year.

Hammack emphasized that if the economy underperforms, Fed officials must remain flexible in their policy responses; she also expressed openness to raising rates if necessary. "Currently, the risks to the federal funds rate moving higher or lower are roughly balanced. History teaches us that flexibility is beneficial," she said.

Hammack also stressed the importance of Fed independence, which enables officials to make difficult policy decisions aimed at long-term economic stability. In her speech, she referenced former Fed Chair Paul Volcker, who successfully curbed high inflation in the late 1970s by sharply raising rates, albeit triggering a recession. During a Q&A session, Hammack stated, "Maintaining this independence is crucial so we can make those difficult trade-offs when needed. Sometimes, short-term pain is necessary to sustain low inflation in the long run."

Dallas Fed President Backs Holding Rates Steady Dallas Fed President Lorie Logan also said on Tuesday that rates should remain unchanged unless new, substantial weakness appears in the labor market. "In the coming months, we will see whether inflation is moving back toward our goal and whether the labor market can maintain stability," Logan expressed optimism about continued disinflation.

Logan stated, "If that is the case, it would suggest our current policy stance is appropriate, and no further rate cuts are needed to achieve our dual mandate goals. Conversely, if inflation declines alongside further, substantial cooling in the labor market, then additional rate cuts may become appropriate."

Logan supported the FOMC's decision to hold rates steady at the January meeting, following three consecutive cuts in late 2025. She had previously opposed cuts in October and December, citing persistently high inflation and a balanced labor market. On Tuesday, Logan reiterated this stance, noting that hiring over the past six months has been near the "breakeven" level estimated by her research team—where job growth matches population growth. However, she admitted she is "not yet fully convinced that inflation is on a sustained path back to the 2% target."

Before becoming Dallas Fed President, Logan managed the central bank's asset portfolio at the New York Fed. She also discussed recent Fed balance sheet measures. Late last year, as government borrowing increased and the Fed continued reducing its bond holdings, money market volatility intensified, draining cash reserves from the financial system. To alleviate this pressure, the Fed resumed expanding its balance sheet, purchasing approximately $110 billion in Treasury bills since December 12.

Logan described this process as technical and separate from monetary policy stance, cautioning against mechanical implementation. "Reserve demand may change over time due to economic growth, shifts in banking and payment activities, and adjustments in regulation and supervision. To maintain efficiency, the volume of reserves we supply must broadly adjust to these changes," she said.

She added that if the Fed maintains ample reserves in the banking system, money market rates, such as the general collateral rate in tri-party repo, should hover near the interest rate on reserve balances over the long term.

Logan again called for the Fed to offer centrally cleared transactions through its Standing Repo Facility, praising the high usage rate of the facility in late 2025 as an "encouraging signal."

U.S. Economic Data Releases Intensify Recent softer inflation data and some stabilization in unemployment have encouraged Fed officials, but new data releases this week may test these assessments. January employment data, delayed due to the recent government shutdown, will be released on Wednesday, while the next Consumer Price Index (CPI) report is expected on Friday.

According to data released earlier Tuesday by the U.S. Commerce Department, December retail sales were weaker than expected, with declines in 8 out of 13 categories.

The U.S. President has explicitly stated his desire for the next Fed Chair to lower rates. This week, he claimed that his nominee to replace Jerome Powell as Fed Chair, Kevin Warsh, could achieve 15% economic growth, highlighting the significant political pressure Warsh would face if confirmed.