On Friday, Cleveland Federal Reserve President Loretta Mester said she sees no evidence of inflation having peaked, and supports a series of aggressive rate hikes to further tame inflation.
Mester said in a live interview, “I think the Fed has shown that we’re in the process of recalibrating our policy to get inflation back down to our 2% goal. That’s the job before us. I don’t want to declare victory on inflation before I see really compelling evidence that our actions are beginning to do the work in bringing down demand in better balance with aggregate supply.”
Although slowing home sales, the jobs report failing to meet estimates on earnings, and other recent data-points would point to a slowing of the economy and inflation, Mester says she would need to see multiple months of that type of data until she will feel inflation has been controlled.
Mester said, “It’s too soon to say that that’s going to change our outlook or my outlook on policy. The No. 1 problem in the economy remains very, very high inflation, well above acceptable levels, and that’s got to be our focus going forward.”
Recent statements have indicated investors can expect half point rate hikes from the Fed in the June and July meetings. At that point, officials will evaluate the effects of those hikes and the state of the economy, before plotting their next moves.
However Mester indicated that it was highly unlikely the Fed would halt rate increases at that point, though they could be reduced in size.
She went on to say, “I’m going to come into the September meeting, if I don’t see compelling evidence [that inflation is cooling], I could easily be at 50 basis points in that meeting as well. There’s no reason we have to make the decision today. But my starting point will be do we need to do another 50 or not, have I seen compelling evidence that inflation is on the downward trajectory. Then maybe we can go 25. I’m not in that camp that we think we stop in September.”