2023-10-20 16:15:00
Federal Reserve Bank of Cleveland President Loretta Mester said Friday that her outlook for the central bank’s interest rate policy still leans toward another increase, while emphasizing that given current economic uncertainties, policy makers had to demonstrate agility.
Regardless of what decision is made at our next meeting, if the economy develops as expected, in my opinion we are likely close to or at a stopping point on the funds rate as we accumulate more information on developments economic and financial conditions and evaluate the effects of the tightening of financial conditions that has already taken place, Mester said in the text of a speech delivered to a meeting of the Shadow Open Market Committee, a group often critical of the actions of the Fed.
Ms. Mester said the Fed’s forecast released at the September meeting called for another increase in the federal funds target rate, currently between 5.25% and 5.5%, by the end of the year, then maintaining rates at high levels for an extended period. This is consistent with my own reading of economic conditions, prospects and risks, she said.
Ms. Mester, who does not have voting rights on the Federal Open Market Committee this year, also stressed that the outlook for monetary policy can change. Whether the federal funds rate should rise above its current level and how long policy should remain restrictive will depend largely on how the economy’s outlook changes and how risks evolve, a- she declared.
The next FOMC meeting will take place from October 31 to November 1 and rates are generally expected to remain stable.
In her remarks, Mester said inflationary pressures were falling but remained too high. She added that labor markets are also rebalancing towards more sustainable levels, while wage pressures appear to be moderating. But she also said inflationary pressures could show an uneven moderation process and added that it was important there was no complacency in bringing price pressures back to the 2% target.
Ms. Mester also said that if the recent rise in bond yields continues, it should help moderate demand, which is consistent with the Fed’s goals. (Reporting by Michael S. Derby; Editing by Andrea Ricci)
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