Cleveland Fed Chair and FOMC member Loretta Mester said in an interview with CNBC on Thursday that the Fed’s task was to remove adjustment measures at the pace needed to get inflation under control. Mester said the situation in Ukraine is adding to economic uncertainty and adding upside risks to inflation, making it more important than ever for the Fed to act. It is possible that a sharp rise in energy prices and supply chain problems will last longer, she added, warning that this increases the chances of high inflation taking hold in the States. -United.
Mester said starting with a 25 basis point hike this month, followed by further increases in the coming months, would put us in a good position, noting that she expects inflation to remain at 3.5% or 4.0% or even more at the end of the year. Mester said that while we need to reflect on the situation in Ukraine, the strength of the US economy and the imbalances all point to a deliberate withdrawal of monetary stimulus.
If by the middle of the year, after the Fed’s rate hikes and balance sheet shrinking, we don’t see inflation receding, it would signal the need to shed housing at a faster pace, he said. Master. It could very well be that interest rates need to move back above long-term neutrality (estimated at around 2.0-2.5%) to bring inflation under control, she warned, pointing out that we can go faster in reducing the balance sheet this time compared to last time.