Cleveland Fed Bank President Loretta Mester said in a panel discussion yesterday that inflation in the US is “pandemic related” only. “Fundamentally, if it’s supply-side driven, that’s not something monetary policy should be responding to,” Mester added.
On monetary policy, she said, “our new strategy says, look, we’re not going to be moving until we have average inflation being 2% and we’re now going to be making up for past misses. I think we’ve basically met that part of the mandate.”
“My forecast is that we’ll meet that [employment] mandate by the end of next year, if things play out as I expect,” Mester said.
“My baseline is we’ll see inflation rates move back down as pent-up demand eases and supply-side challenges ease. But, as you know, that is taking longer than people thought and, in some cases supply chain issues are getting worse,” Mester said.
