Analysis: Former Fed Vice Chair Clarida Advocates "Wait and See" Stance on 2026 Rate Cuts

The event centers on former Fed Vice Chairman Richard Clarida’s (now PIMCO global economic advisor) December 18, 2025 CNBC interview [1], where he stated that a prudent strategy for future rate cuts is to “wait and see for some time.” This follows the Fed’s three consecutive quarter-point rate cuts in 2025 (September, November, December), which reduced the federal funds rate from 4.25%–4.5% to 3.5%–3.75% [4].

Clarida’s cautious stance mirrored comments from current Fed officials: New York Fed President John Williams (FOMC vice chair) noted no “urgent need” to cut rates further [2], while Cleveland Fed President Beth Hammack preferred holding rates steady until spring 2026 to assess inflation dynamics, including tariff-related supply chain effects [4].

Market expectations for 2026 rate cuts shifted dramatically in response to these remarks. On December 17, markets priced in approximately two quarter-point cuts [3]; after softer CPI data on December 18, expectations rose to 63 basis points of cuts [5]; by December 23, markets assigned 87% odds of no January 2026 cut, with the next projected cut in June 2026 [6][7].

1. Alignment Between Former and Current Fed Leadership
   : Clarida’s “wait and see” stance reinforced the cautious narrative from current Fed officials, underscoring a collective focus on data-driven decision-making amid inflation and labor market uncertainty.
2. Market Sensitivity to Fed Communication
   : The rapid shift in rate-cut expectations highlights that market sentiment remains highly responsive to both current Fed officials’ remarks and insights from respected former Fed leaders like Clarida.
3. Tariff-Related Inflation as a Policy Driver
   : The emphasis on monitoring tariff-related supply chain effects (cited by Hammack) indicates ongoing concerns about external factors influencing domestic inflation trends.

• Risks
  : A prolonged pause in rate cuts could slow reductions in borrowing costs for businesses and consumers, potentially dampening near-term capital investment and household spending [4]. Rate-sensitive sectors like technology and real estate may experience tempered gains amid reduced rate-cut expectations [3][7].
• Opportunities
  : A data-driven pause reduces the risk of reigniting inflation by allowing the Fed to assess the cumulative impact of its 2025 rate cuts [2]. Stabilized Treasury yields could also reduce market volatility, supporting more predictable investment planning.

• Richard Clarida, former Fed Vice Chair (2018–2022) and current PIMCO advisor, recommended a “wait and see” approach for rate cuts [1].
• Current Fed officials Williams and Hammack echoed cautious sentiments, prioritizing data on inflation and tariff impacts [2][4].
• The Fed’s benchmark rate stood at 3.5%–3.75% after three 2025 cuts [4].
• Market expectations shifted from ~2 2026 cuts (Dec 17) to no January 2026 cut and a June 2026 projected cut (Dec 23) [3][6][7].