CLEVELAND–While there is increased discussion the Fed will slow its pace of rate increases, one Fed Bank president is not onboard.
Federal Reserve Bank of Cleveland President Loretta Mester said the Fed likely has more interest rate rises ahead as there are indicators the recent banking sector troubles have been contained.
To keep inflation on a sustained downward path to 2% and keep inflation expectations anchored, Mester, who does not have a vote on the rate-setting Federal Open Markets Committee (FOMC), said she sees monetary policy moving "somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time,” according to Reuters.
“Precisely how much higher the federal funds rate will need to go from here and for how long policy will need to remain restrictive will depend on how much inflation and inflation expectations are moving down, and that will depend on how much demand is slowing, supply challenges are being resolved, and price pressures are easing,” Mester said in a speech before a group of economists in New York, Reuters reported.
As CUToday.info reported, the Fed in late March raised rates by a quarter percentage point, to between 4.75% and 5%.
‘Comfortable Moving Ahead’
"I was very comfortable with moving ahead” with the rate rise, given that authorities had taken steps to manage risks coming from banking sector troubles, Mester added in remarks following her speech, Reuters reported.
“My forecast is similar to the modal forecasts of FOMC participants released two weeks ago, although I see somewhat more persistent inflation pressures than the median forecast among participants,” she said.
She further said she does not believe the Fed will need to cut rates much sooner than central bankers currently expect.
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