The Federal Reserve has spent nearly five years missing its 2% inflation target, and now one of its own officials is saying Americans shouldn't expect to hit that mark for at least another two to three years. Beth Hammack, president of the Cleveland Fed, delivered that sobering projection while recommending that monetary policy stay “modestly restrictive” to help push inflation down. Translation: don't hold your breath for rate cuts.
The Fed's 2% inflation target remains out of reach for years, with restrictive policy here to stay and rate cuts off the table.
Hammack isn't supporting immediate rate cuts, and for good reason. Inflation is expected to overshoot the 2% goal by a full percentage point in 2025. She even floated the possibility of a decade-long stretch where inflation stays above target. That's not a typo. A decade.
The FOMC minutes from May 2025 back up this gloomy timeline. The Committee projects inflation won't actually reach 2% until 2027, thanks largely to tariffs that are expected to spike prices through 2025 before moderating in 2026. Meanwhile, the federal funds rate is being held at 4.25–4.5%, which officials insist is restrictive. Hammack, however, noted that financial conditions remain “quite accommodative,” which could make the whole disinflation effort messier. Her stance on maintaining restrictive policy could have significant implications for currency value fluctuations in the foreign exchange market as traders price in the prolonged timeline.
Uncertainty is everywhere. Fed staff flagged huge question marks around trade policy and economic projections. Risks to real economic activity tilt to the downside, meaning recession odds are climbing. At the same time, upside inflation risks persist, especially into 2026 and beyond. The unemployment rate is forecast to rise above its natural rate by the end of 2025, though Hammack expects improvement after that short uptick. Market participants have raised the probability of a recession within six months following recent trade policy changes that are being interpreted as a negative supply shock. Hammack holds one of the higher estimates of neutral on the committee, suggesting she sees less room for accommodation than many of her colleagues.
Before the pandemic, inflation consistently ran below 2%. Now the script has flipped. The U.S. hasn't hit that target since roughly 2020, and Hammack suggests above-target inflation could linger until early 2028. That's eight years of missing the mark. The Fed is caught between its dual mandates—employment and inflation—both under pressure at the same time. Policy will need to stay restrictive for a while, and Americans should brace for a slow, grinding return to normal. If it ever comes.
