Mester: Fed To Push Policy Quickly Enough To Contain Hot Inflation

Cleveland Fed President and FOMC member Loretta Mester said on Thursday that the Fed aims to reduce policy accommodation at the pace necessary to control inflation whilst also sustaining economic activity.

Mester added that the Fed aims to bring demand into better balance with supply, whilst also sustaining the health of the labour market. The US labour market is very tight, she added, commenting also that inflation is very elevated.

The Federal Reserve’s aim is to raise rates quickly enough to bring down inflation without pushing the US economy into recession or damaging the strong jobs market, Cleveland Federal Reserve Bank President Loretta Mester signaled on Thursday.

“Currently, labour markets in the US are very tight and inflation is very elevated,” Mester said in remarks prepared for delivery at the University of Akron in Ohio. “Our intent is to reduce accommodation at the pace necessary to bring demand into better balance with constrained supply in order to get inflation under control while sustaining the expansion in economic activity and healthy labour markets.”


Mester has previously said she supports using bigger than usual half-point rate hikes to lift borrowing costs quickly, to about 2.5% by the end of the year. She also supports getting an early start on reducing the Fed’s balance sheet to put further downward pressure on inflation.

She did not provide fresh details on her view of how fast the Fed should raise interest rates or on the outlook for the economy in Thursday’s speech, which was largely focused on workforce development, including how to build better programs and evaluate them adequately.

The Fed last month delivered the first in what is expected to be a series of interest rate increases this year and into next to bring down 40-year high inflation. The US unemployment rate is at 3.6%, only slightly above the pre-pandemic level, and job openings are at near-record levels. Fed policymakers say those figures suggest labour markets can stay strong even as borrowing costs rise.