Cleveland Fed President Beth Hammack warned of two-sided risks to interest rates in an exclusive interview with Bloomberg's Michael McKee. Hammack emphasized that the Federal Reserve faces complex challenges as it weighs economic data, with both upside and downside risks affecting monetary policy decisions. Her comments come amid growing uncertainty about the Fed's next moves.

Hammack noted that while the labor market shows signs of stabilizing, recent jobs numbers disappointed market expectations. This mixed economic picture creates a difficult environment for policymakers who must balance inflation concerns against slowing growth. The Fed's dual mandate of price stability and maximum employment becomes particularly challenging when data points in conflicting directions.

Her remarks highlight the delicate balance facing the Federal Reserve as it navigates between potential economic overheating and recession risks. With markets closely watching for signals, Hammack's acknowledgment of two-sided risks suggests the Fed may maintain a flexible approach rather than committing to a clear directional path. This uncertainty could keep volatility elevated in financial markets as investors adjust to the possibility of multiple policy outcomes.