Federal Reserve officials intensively signal hawkish stance, sticky inflation risk becomes the biggest obstacle to rate cuts

Federal Reserve official Musialem delivered a speech tonight, once again emphasizing that the risk of persistent inflation remains. This is not an isolated signal but a collective stance within the Federal Reserve regarding inflation issues—earlier this morning, New York Fed President Williams stated there is no reason to cut interest rates in the near term. Against the backdrop of the just-released December CPI data in the United States, the intensive speeches by Fed officials outline a clear policy framework: the sticky inflation problem is far from resolved, and expectations for rate cuts need to be significantly adjusted.

Sticky Inflation Remains a Core Concern for the Fed

As a 2028 FOMC voting member and President of the St. Louis Fed, Musialem’s remarks represent the Fed’s ongoing vigilance over inflation. The statement “the risk of persistent inflation still exists” appears concise but actually reflects a deeper issue: although inflation has retreated from its peak in 2022, the pace of decline has slowed, and inflation in some service sectors remains resilient. The Fed’s concerns about a resurgence of inflation have not dissipated.

On the same day, Williams’ hawkish stance reinforced this understanding. He explicitly stated “there is no reason to cut rates in the short term,” indicating that the Fed remains cautious about the timing of rate cuts. Although their wording differs, both officials point to the same conclusion: the inflation problem has not been fully resolved, and the Fed will not rush to ease policy.

Market Rate Cut Expectations Face Adjustment Pressure

The intensive speeches by Fed officials directly influence market expectations. Previously, market anticipation for rate cuts was gradually rising, but these hawkish statements undoubtedly dampened that optimism. When sticky inflation becomes a consensus within the Fed, the timetable for rate cuts will inevitably be pushed back. This exerts downward pressure on assets sensitive to interest rates—such as cryptocurrencies and gold—as delayed rate cuts mean the dollar’s attractiveness may remain relatively strong, and capital flows into dollar-denominated assets could slow.

Validation Role of the Same Day CPI Data

It is worth noting that the December CPI data for the US was released today at 21:30. This data directly impacts the credibility of the Fed officials’ speeches. If the CPI remains resilient (year-over-year or month-over-month figures higher than expected), Musialem’s and Williams’ hawkish statements will be supported by data, further reinforcing market perceptions of inflation risks; conversely, if CPI data exceeds expectations, the market may reassess the hawkish tone of officials’ remarks.

Summary

Musialem’s speech reinforces the Fed’s concern over sticky inflation and, together with Williams’ statements, outlines a policy path of caution in the short term. The risk of inflation remains, which has become a consensus among Fed officials. For the market, this means rate cut expectations need to be significantly lowered, and the dollar may continue to be supported. Moving forward, close attention should be paid to other Fed officials’ statements and the upcoming CPI data, as both will directly influence market judgments on the timing of rate cuts.