Interest rate cut window temporarily closed? The Federal Reserve's hawks speak out: no need to adjust rates in the coming months.

Federal Reserve hawkish official and Cleveland Fed President Loretta Mester stated recently that after three consecutive rate cuts by the Federal Reserve, she believes there is no need to adjust US rates in the coming months. Mester does not have voting rights on monetary policy this year, but will become an FOMC voter in 2026. Mester opposed the recent rate cuts because she is more concerned about high inflation than the potential weakness in the labor market, which prompted the Fed to cut rates by a total of 75 basis points in the past three meetings. Mester stated that at least until the spring of next year, the Fed does not need to adjust the current benchmark rate range of 3.5%-3.75%. She pointed out that by then, as President Trump's tariff policy is more fully digested in the supply chain, the Fed will be able to more accurately assess whether recent commodity price inflation is falling. Mester believes that due to data distortions, the 2.7% consumer price index (CPI) in November likely underestimated the increase in prices. "My baseline expectation is that we can maintain current rate levels for a period of time before we get clearer signals - whether inflation is returning to target levels or there is a more obvious weakness in the labor market." Mester emphasized her concerns about inflation in a podcast interview recorded last Thursday. Earlier this month, Mester stated at an event in Cincinnati that she leans toward maintaining rates at a slightly more restrictive level to continue putting downward pressure on inflation. Last Friday, the Fed's "number three" official and New York Fed President John Williams also signaled a pause in rate cuts. He stated that given recent job and inflation data, there is currently no urgency for further rate cuts, "because the rate cuts we have implemented previously have put us in a very favorable position." The Federal Reserve made its third consecutive rate cut on December 10th, but saw rare "internal divisions". Chicago Fed President Charles Evans and Kansas City Fed President Esther George officially voted to maintain rates, with six other policymakers indicating in the dot plot that they also do not support further rate cuts. According to CME's "Fed Watch," the probability of a 25 basis point rate cut by the Fed in January next year is 21%, while the probability of keeping rates unchanged is 79%. The probability of a cumulative 25 basis point rate cut by March next year is 47.1%, with a 43.4% probability of keeping rates unchanged, and a 9.5% probability of a cumulative 50 basis point rate cut. Article sourced from "Financial Association", GMTEight editor: Xu Wenqiang.