Loretta Mester, the President of the Federal Reserve Bank of Cleveland, expressed her view on the necessity for further interest rate hikes during a speech in New York. Mester, known for her previous comments supporting rate increases, stated that interest rates should rise above 5% and remain at that level for a while to effectively address inflation.
According to Mester, the Central Bank must take decisive action to bring inflation under control. She emphasized her comfort with the idea of raising interest rates as a viable solution to the problem.
“The extent to which the federal funds rate needs to rise from here and how long policy needs to remain restrictive will depend on how much inflation and inflation expectations move down and how they evolve.”Loretta Mester
Mester noted that the current economic climate shows signs of slowing demand, resolving supply issues, and easing price pressures. To anchor inflation expectations and bring inflation down to a sustainable trajectory of around 2%, she said, “My modal projection calls for the federal funds rate to move up to over 5% this year and for the real federal funds rate to move into somewhat restrictive territory.”
Loretta Mester’s call for higher interest rates highlights the need for central banks and policymakers to take the inflation issue seriously and implement swift and effective measures. Managing inflation and maintaining sustainable economic growth is crucial for ensuring a stable economy and a secure environment for consumers. In the coming days, the approach of policymakers in addressing this challenge and shaping their decisions on interest rates will be of great importance.