Mortgage pros weigh a longer Fed pause after Hammack argued cuts have gone far enough
Cleveland Fed president Beth Hammack signaled she would support keeping United States interest rates on hold for months, reinforcing expectations that mortgage markets might be in for a longer stretch of “higher for longer” funding costs even after three recent cuts.
Hammack, who dissented against the Fed’s latest reductions, framed the first-quarter moves – totaling 75 basis points – as enough for now while policymakers waited to see how inflation and jobs data evolved.
She argued that the policy rate, currently set in a 3.5% to 3.75% range, sat “around a neutral level,” but said she would “prefer a slightly more restrictive stance to help put more pressure on inflation.” Hammack will be a voting member of the Federal Open Market Committee (FOMC) in 2026.
Her base case, she said, was a prolonged pause. “Where we are today is my base case that we can stay here for some period of time until we get clearer evidence that either inflation is coming back down to target or the employment side is weakening more materially,” Hammack said in a Wall Street Journal podcast.
Hammack also warned that the November consumer price index reading of 2.7% probably understated 12‑month price growth because of “data distortions,” and pointed to inflation being stuck near 3% for much of the past 18 months.
She said input costs for businesses were still rising, which could “lead to renewed price increases,” reinforcing the need for caution.
Some of those pressures, she said, reflected president Donald Trump’s tariffs working through supply chains.
Implications for mortgage and housing
For mortgage professionals, a longer Fed pause after front‑loaded cuts has already complicated rate expectations. Mortgage rates do not always move in lockstep with the Fed, and during earlier cycles they have remained “elevated, often averaging above 7 percent” even as policymakers cut their benchmark rate multiple times.
More recently, some lenders reported 30‑year mortgage rates slipping toward the low‑6% range after the latest cut, but analysts warned that “mortgage rates could remain stubbornly high” without a deeper shift in inflation and bond‑market expectations.
Sam Williamson of First American says the Fed will likely proceed cautiously in 2026, with one or two rate cuts expected despite leadership changes. Policy remains data-driven, balancing inflation and employment. Read more and share your thoughts.https://t.co/2nyZa0eFbW
— Mortgage Professional America Magazine (@MPAMagazineUS) December 16, 2025
Broader Fed debate and market outlook
Hammack’s stance underscores growing divisions on the FOMC where the December cut drew three dissents and projections showed several officials preferring no change at all.
She said she did not put “much weight on any single economic report” and wanted to “take some time” before the next meeting, especially given the “noise” in recent data from the record government shutdown.
Easing inflation has stoked hopes for deeper Fed rate cuts in 2026 and helps bring mortgage rates back toward one‑year lows, offering a stable backdrop for buyers.
Yet Hammack’s preference for a slightly tighter stance suggests borrowers and originators might need to plan for a slower grind lower in borrowing costs rather than a swift return to the ultra‑cheap money of the past cycle.
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