Cleveland Fed President Loretta Mester said yesterday, “if by the September FOMC meeting, the monthly readings on inflation provide compelling evidence that inflation is moving down, then the pace of rate increases could slow. But if inflation has failed to moderate, then a faster pace of rate increases could be necessary.”
“I will need to see several months of sustained downward monthly readings of inflation. I have not seen that yet,” she said, thus she could not conclude that inflation has peaked.
On the economy, Mester said, “the risk of recession has risen, but because underlying aggregate demand momentum and the demand for labor are so strong, a good case can still be made that as demand and supply come into better balance, a sharp slowdown can be avoided, with growth slowing to a trend pace this year, labor market conditions remaining healthy, and inflation moving down to a 41/2 to 51/2 percent range this year and declining further next year,” Mester said.
