Fed’s Mester says larger risks come from hiking rates too little
The Federal Reserve should be wary of wishful thinking about inflation that would lead the central bank to pause hiking interest rates or reverse course, Cleveland Fed President Loretta Mester said on Tuesday. “Given current economic conditions and the outlook, in my view, at this point the larger risks come from tightening too little and allowing very high inflation to persist and become embedded in the economy,” Mester said in remarks to the Economic Club of New York. Mester said her preferred path for the Fed’s benchmark rate is above the median forecast of the Fed’s “dot-plot,” which points to rates getting to a range of 4.5%-4.75% by next year. Mester, who is a voting member of the Fed’s interest-rate committee this year, said she doesn’t expect any cuts in the Fed’s benchmark rate next year. She stressed that this forecast is based on her current reading of the economy and she will adjust her views based on the economic and financial information for the outlook and the risks around the outlook.
