The president of the Cleveland Federal Reserve said on Thursday that the central bank should continue to raise interest rates until high U.S. inflation begins to show signs of abating, joining a group of senior U.S. central bank officials backing more hawkish moves in the field of monetary policy.
“We are committed to reducing inflation,” noted Loretta Mester at an Economic Club of Pittsburgh event. He added that he would need to see several months of sustained price deflation before he is convinced that the Fed’s efforts are working.
Although the economy is slowing, Mester insisted that the US is not in recession, despite two consecutive quarters of year-over-year contraction in the country’s GDP.
“We are not in a recession right now. Have the risks of a recession increased? Yes,” he said.
He noted that the business leaders he is talking to are still trying to hire workers, in a sign that the economy is still expanding and that demand has not eased enough to relieve inflationary pressures.
After the July hike, the Fed’s federal funds rate is in the range of 2.25% – 2.5% and could reach as high as 4% in 2023.
In June, US inflation hit 9.1% on an annual basis, down from rates below 2% 18 months ago.
This year, Mester, who is considered a monetary policy hawk, has voting rights on the Federal Open Market Committee (FOMC), which decides on the Fed’s rate setting.
Source: Capital
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