The Zhitong Finance App learned that in the early morning of October 13, Beijing time, 2026 Federal Reserve FOMC voting committee member and Cleveland Federal Reserve Chairman Beth Hammack (Beth Hammack) once again sent a hawkish monetary policy signal — that is, after waiting, the Fed officials were forced to drastically correct the trajectory of inflation. It is better to adjust monetary policy as soon as conditions permit.
She herself did not clearly support the October rate hike in her latest speech, but the sharp rebound in oil prices, continued high diesel price spreads, and 10-year and 30-year long-term US bond yields remained near their highest level in more than 20 years, testing the dovish camp's expectations for “the Federal Reserve suspended interest rate hikes in October and completed this round of austerity soon thereafter.”
The “bond market replaces the Fed's interest rate hike” logic and the two major dovish logic where oil prices cool down and the end of the Federal Reserve's monetary policy austerity process can be described as facing major challenges. However, with regard to expectations of the Fed's monetary policy action in October, the recent market interest rate hike still tends to remain on hold in October after announcing the 25 basis point rate hike as scheduled in September. Interest rate futures market traders have shown that the probability of an October rate hike is only about 20%, but compared to Hamak's latest hawkish remarks, the pricing probability of interest rate hikes has warmed up.
Federal Reserve Board Secretary Hamak breaks the “dovish fantasy”: smaller, more frequent interest rate adjustments are preferable
Cleveland Federal Reserve Bank Chairman Beth Hammark said that adjusting the Fed's monetary policy to a smaller extent and at a higher frequency would help keep inflation expectations stable, but she did not clearly support this month's rate hike.
In a speech prepared for the annual meeting of the American Association of Commercial Economics held in Cleveland on Monday local time, Hamak said: “Where possible, I generally think that making small adjustments and acting relatively quickly is better than waiting and observing for a period of time, and at the risk of requiring more substantial corrections in the future.”
Federal Reserve officials voted unanimously last month to raise interest rates in response to high inflation. Policymakers generally agree that it is necessary to raise interest rates to contain the price pressure re-triggered by the Iran war and demand related to artificial intelligence.
The Cleveland Federal Reserve Chairman, who has the right to vote on the Federal Reserve's FOMC monetary policy this year, said that inflationary pressure is not limited to the energy sector. She pointed out that higher tariffs, the increase in demand for electricity and technology components driven by the construction of artificial intelligence computing power infrastructure, and the surge in demand for debt issuance related to AI infrastructure are all having an impact on inflation.
Hamak said earlier this month that before meeting again from October 27th to 28th, Federal Reserve officials still have more information to evaluate, including the latest consumer price data to be released on Wednesday evening Beijing time.
Soon after this case, two critical Federal Reserve monetary policy makers said there was no need to rush to raise interest rates at two consecutive Fed FOMC monetary policy meetings. Investors then drastically cut their bets on this month's rate hike.
In this speech, which mainly revolves around communication, Hamak emphasized that the monetary policy makers of the Federal Reserve explain the economic data and thought process on which policies are formulated can benefit the public and investors.
She said that officials explain the so-called “response function” to help consumers, investors and business leaders make smarter decisions. However, officials should not make “definitive predictions” about the future direction of interest rates.
Federal Reserve Chairman Kevin Walsh was appointed by President Donald Trump earlier this year. To avoid providing financial markets with too much guidance on interest rate trends, he reduced open communication on economic and monetary policies.
“I want to draw the line here. The response function is not a forward-looking guide,” Hamak said. “Thoroughly conflating the two may cause a well-intentioned logical explanation to be understood as a promise.”
Hamak dismantled two fantasy situations in one fell swoop: high yields and low oil prices are no guarantee that the Fed will stop raising interest rates
Hamak's latest hawkish remarks can be described as challenging two automatic inferences: a rise in long-term US bond yields can replace the Federal Reserve's interest rate hike process, and falling oil prices can end inflation. The former ignores strong stock markets, low credit spreads, and strong capital expenditure to support demand; the latter ignores ongoing pressure on tariffs, AI construction, and service prices.
In her latest speech, she judged that overall financial conditions are still neutral, and suggested that actual neutral interest rates may return to pre-financial crisis levels. Moreover, in her recent speeches, she stressed that whether the policy is tight enough depends on whether demand and inflation cool down. As a result, interest rate hikes may be suspended in October. In her opinion, this does not mean that the austerity process is over; preferring a slight acceleration does not mean that they have promised continuous rate hikes.
Long-term returns depend on future short-term interest rate expectations and term premiums. Even if the probability of interest rate hikes at one meeting falls, continued inflation, fiscal and corporate financing supply, and geographical uncertainty may still raise long-term capital prices and influence financing conditions in Europe and Japan through cross-border asset allocation. As deduced from this, the major test of investment related to AI computing power infrastructure, which affects the bullish trajectory of global stock markets, is also more specific: the AI computing infrastructure construction process dramatically boosts profits while competing for electricity, equipment, and capital; in particular, after long-term financing costs dominated by 10-year US bond yields rise sharply, whether the project's cash return can cover capital costs will become an important dividing line for valuation.
The geopolitical cease-fire in the Middle East, Russia, and Ukraine has yet to be implemented, and warnings about inflation and long-term US debt are still echoing
Hamak's overall monetary policy stance can be described as being clearly hawkish, but it retains flexibility in the timing of action. She voted for an interest rate hike of 25 basis points at the FOMC monetary policy meeting in July; this time, she emphasized the need for restrictive policies. In an interview with Reuters reporters on the same day, she also made it clear that the benchmark interest rate needed to be higher, but she is still open to the October Federal Reserve FOMC meeting. She hopes to reduce demand pressure by moderately reducing corporate investment or consumption driven by wealth effects, and to avoid damage to non-farm payrolls as much as possible.
It can be said that the global long-term bond market has recently drastically reassessed the global long-term energy inflation trajectory: on October 7, US 10-year and 30-year treasury yields hit 5.368% and 5.735%, respectively, high levels since 2002; official data fell back to 5.24% and 5.60% on October 9. On October 12, the US bond market was closed due to a holiday.
Furthermore, the global geopolitical situation has yet to reliably cool the prospects for US energy costs and widespread inflation, as well as the long-term US bond yield trajectory. The Russian-Ukrainian energy cease-fire is still being negotiated. Zelensky said Russia continues to attack energy facilities; Saudi and Hormuz shipping is facing another security shock. On October 12, Brent and WTI closed up 1.84% and 2.06%, respectively, at $106.65 and $93.74 per barrel. On October 9, although the price difference between NYMEX's ultra-low sulphur diesel and WTI cracking fell by 6.45 US dollars in recent months, it still reached 96.80 US dollars/barrel. It is in a historically high range, which is enough to reflect that the bottlenecks in refining and refined oil supply have not been lifted.