LD
Cleveland Fed President said on Thursday that she’d “like to see inflation down for a couple more data points,” as she “wants to be comfortable” that inflation is moving sustainably toward the Federal Reserve’s 2% goal.
“If the economy evolves the way I anticipate.. a little more moderate employment growth, we’ll be able later this year to take back some of the policy we put in place” to tame inflation, she said in an interview on CNBC.
Her comments were consistent with a speech she delivered earlier today, noting that the risk of moving too early to cut rates could risk driving inflation higher.
“The goal here of the Fed is: let’s ensure that inflation is on its way to 2%,” she said.
When inflation soared in 2022, the Fed had to focus more on the price stability half of its mandate. “This year we can focus on both parts of our mandate,” including the full employment half.
The Fed’s policy is currently restrictive, she contends. “We have seen it in the most interest-rate-sensitive parts of the economy,” such as the housing market.
According to what she’s hearing from her business contacts in her district, Mester isn’t expecting to see a huge increase in business investment, which could lead to a resurgence in inflation, once interest rates become a little less restrictive.
She’s expecting the Federal Open Market Committee will move quite slowly in easing policy, so as not to surprise the markets.