Cleveland Federal Reserve Bank President Loretta Mester (Loretta Mester) said on Friday (3rd) that she did not see sufficient evidence of inflation peaking, so she favored a series of aggressive interest rate hikes by the Federal Reserve (Fed) ahead.
“I think the Fed has shown that we are in the process of recalibrating policy and getting inflation back to the 2 percent target is a priority,” Mester said.
She added, “I am reluctant to declare victory over inflation until I see really convincing evidence that our actions are starting to take effect, that lower demand is more balanced with positive supply.”
The U.S. Bureau of Labor Statistics reported on the same day that nonfarm payrolls increased by 390,000 in May, and more importantly, average hourly earnings rose just 0.3% from the previous month, slightly less thanDow Jonesestimate.
While other recent data suggest inflation has at least declined, Mester said she would have to see the trend continue for several months to be reassured.
“It’s too early to say that this is going to change our outlook, or my outlook for policy,” she said. “The number one problem with the economy is still this very high inflation, well above acceptable levels, which is what we have. next focus.”
The Federal Open Market Committee (FOMC), which sets interest rates, said in a recent statement that the June and July meetings may raise interest rates by 50 basis points (2 yards). Officials may then assess the impact of the policy tightening process and other factors on the inflation picture, but Mester said that while the pace of rate hikes could be reduced, any kind of pause in rate hikes was unlikely.
“I’m going to the September meeting where I’d easily make the decision to raise rates by 50 basis points if I don’t see evidence that inflation is cooling.”
“There’s no reason why we have to make a decision today, but my starting point will be, do we have another 50 basis points of rate hikes, do I see any signs of a downtrend in inflation, and if so, we It can be reduced to 25 basis points, but I am not in favor of a pause in rate hikes in September.” Mester is a 2022 FOMC voting member.
Mester’s comments echoed Thursday’s statement by Fed Vice Chairman Lael Brainard, who said, “It’s hard to see a case for a pause in rate hikes in September, with inflation near 40-year highs, keeping inflation in check. It’s a top priority for the Fed.”