Federal Reserve Bank of Cleveland President Beth Hammack warns against further rate cuts due to risks of prolonged elevated inflation and increased risk-taking in financial markets. Financial conditions are already accommodative, and lowering rates could support risky lending and distort market pricing, potentially leading to a larger economic downturn.

Hammack opposed the Fed’s October rate cut, citing concerns about financial stability risks. She emphasizes the need for monetary policy to address still-high levels of inflation and bring it back to target. Meeting minutes reveal a divided path for central bankers, with some officials wary of additional rate cuts.

Despite opposition from some regional Fed officials, financial markets anticipate the Fed will maintain rates at the upcoming FOMC meeting. Hammack’s focus on the impact of easing credit costs on financial stability contrasts with other officials’ emphasis on the job market and inflation dynamics. She highlights concerns about leverage levels in hedge funds and insurers, as well as potential risks from private credit and stablecoins.

Read more at Yahoo Finance: Fed’s Hammack warns more rate cuts court financial stability risks