Federal Reserve Bank of Cleveland President Loretta Mester said Thursday inflation remains too high and noted that she was open to raising rates by more than her colleagues wanted at their last monetary policy meeting.
The Fed “has come an appreciable way in bringing policy from a very accommodative stance to a restrictive one, but I believe we have more work to do,” Mester said in a speech text. “At this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time to be sufficiently restrictive to ensure that inflation is on a sustainable path back to 2%,” she said.
When the Fed met at the start of the month to deliberate on interest rate policy, it moderated the pace of what had been a torrid barrage of rate hikes and lifted its overnight target rate by quarter percentage point, to between 4.5% and 4.75%. The Fed signaled more rate hikes are coming to help lower overly high inflation levels back to the 2% target.
Mester, who does not have a vote on the Federal Open Market Committee this year, noted she would have been open to a larger rate rise at the gathering. “Setting aside what financial market participants expected us to do, I saw a compelling economic case for a 50-basis-point increase, which would have brought the top of the target range to 5%,” she said.
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