Cleveland Fed President Beth Hammack is telling markets the central bank needs to move now to get inflation back to its 2% goal, a signal that Fed officials remain unwilling to tolerate another round of price pressure even as investors debate the timing of the next rate move.
Cleveland Fed Hammack urges action on inflation
Her comments matter because inflation is still running above target across the Fed’s preferred gauges. The consumer price index was forecast to rise 0.35% in August after a 0.07% increase in July, while core CPI was seen up 0.21% following a 0.22% gain. That leaves the inflation backdrop sticky enough to keep policymakers focused on the risk that price momentum re-accelerates.
Sentiment IndicatorsⓘProprietary · adalytica.com · August 27, 2026
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The Fed funds rate is still at 3.63%, well above the levels seen before the pandemic, and the bond market has been whipsawing as traders reassess the path ahead. The iShares 20+ Year Treasury Bond ETF, TLT, has been hovering around $83, while the iShares 7-10 Year Treasury Bond ETF, IEF, has held near $93, showing investors are pricing in a cautious outlook rather than a clean pivot to easier policy.
Market expectations for inflation are also strained. Adalytica’s gauge for confidence in the Fed’s 2% inflation target sits in fear territory at 21, while its long-term inflation expectations sentiment is at 25 and the 10-year breakeven sentiment at 27, underscoring persistent skepticism that price pressures are fully contained.
CPIAUCSL vs CPILFESL — macro contextadalytica.com
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For investors, Hammack’s message keeps the odds tilted toward tighter-for-longer policy and limits the case for aggressive rate cuts. That is constructive for cash and short-duration instruments, but it can pressure longer-dated Treasuries, rate-sensitive equities and borrowers counting on cheaper financing.
The broader narrative is that Fed officials are trying to prevent a relapse in inflation before it becomes embedded. With core price gains still elevated and policy rates already restrictive, the next batch of inflation data and Fed commentary will be critical for determining whether markets extend the recent bond repricing or settle into a slower easing path.
| Entity | Gains | Losses |
|---|---|---|
| Fed hawks | ▲Policy credibility | ▼Rate-cut hopes |
| Dollar bulls | ▲Higher-for-longer narrative | ▼Treasury bulls |
| Short-duration investors | ▲Stable yield income | ▼Long-bond holders |
| Borrowers/homebuyers | ▲— | ▼Financing costs |
