Cleveland Fed President Loretta Mester acknowledged in a speech yesterday the robust state of the economy with a cautious stance on inflation and interest rates. She signaled the possibility of another rate hike this year.

“I suspect we may well need to raise the fed funds rate once more this year and then hold it there for some time,” she said.

However, Mester also underscored the contingent nature of future monetary policy decisions, stating, “whether the fed funds rate needs to go higher than its current level and for how long policy needs to remain restrictive will depend on how the economy evolves relative to the outlook.”

Inflation, according to Mester, continues to pose a significant challenge. She plainly remarked that inflation remains “too high”. Though she expects some easing of price pressures, she cautioned that “the risks to the inflation forecast remain tilted to the upside.”

On a positive note, Mester expressed optimism about the broader economic picture. “The economy is on a good path,” she observed. Delving into labor market dynamics, she pointed out that while conditions remain robust, the disparity between labor demand and supply is shrinking, indicating that “firms are finding it easier to find the workers they need.”

Fed Vice Chair Richard Clarida said in a speech that “we are clearly a ways away from considering raising interest rates and this is certainly not something on the radar screen right now”.

If outlook of inflation and unemployment turn out to be the actual outcomes, the necessary conditions for raising federal funds rate “will have been met by year-end 2022.” If inflation remain well anchored at 2%, commencing policy normalization in 2023 would then be “entirely consistent with our new flexible average inflation targeting framework.”

As for asset purchases, he said FOMC members expected the economy to continue to move toward the standard of “substantial further progress.”

FOMC will asses the progress in coming meetings. He reiterated the pledge that, “we will provide advance notice before making any changes to our purchases.”

Full speech here.

In a Yahoo Finance interview, New York Fed President John Williams stated that one more rate hike could be a “reasonable starting place,” noting that it aligns with the median expectation of his colleagues. However, Williams emphasized the importance of data-driven decisions, saying, “We have to be driven by the data… I will say that one thing that we’re paying attention to is credit conditions but also do we really see signs of this underlying inflation coming down?”

Williams highlighted the challenges ahead, stating, “Some of this core services inflation excluding housing hasn’t budged yet, so we’ve got our work cut out for us to get inflation back to 2%.” He added that the central question revolves around determining what will be sufficiently restrictive on policy and whether additional measures are needed to achieve their goals, with data and outlook as the key drivers.

Dallas Fed President Lorie Logan, in her speech on Saturday, emphasized the importance of maintaining tight financial conditions to prevent resurgence of inflation. She expressed concern that if these conditions are not sustained, progress made in controlling inflation could be reversed.

Logan Logan underscored the significant role that restrictive financial conditions have played in “bringing demand into line with supply and keeping inflation expectations well-anchored”.

However, she noted a recent reversal in this trend, pointing out that long-term yields have relinquished much of the tightening observed over the summer. She warned, “We can’t count on sustaining price stability if we don’t maintain sufficiently restrictive financial conditions.”

Logan also addressed the Federal Reserve’s balance sheet runoff. She indicated that it might be appropriate to consider slowing the pace of this runoff, particularly as overnight reverse repurchase agreement balances approach lower levels.

Fed Vice Chair Richard Clarida said in a Bloomberg interview that “we have a symmetric objective around 2 percent.” And he emphasized that “two percent is not meant to be a ceiling”. He added that “we’ve operated below 2 percent, we could operate somewhat above 2 percent, depending on the shocks.”

Clarida also said the US economy is in good shape with solid outlook. And, the current monetary policy framework is serving Fed well.

In a speech, Fed Chair Vice Clarida said the US is “a ways away from considering raising interest rates”. However, if outlook for inflation and unemployment realized over time, the “three necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022”.

Clarida also said his individual projections for GDP growth, the unemployment rate, inflation and the policy rate path were quite close the the September median projections. Real GDP would return to its prepandemic trend growth trajectory by Q4 this year, representing “one of the most rapid such recoveries in 50 years.” The 4.2 “employment gap” relative to the previous cycle peak will be eliminated by the end of 2022.

Realized PCE inflation so far this year was “much more than a ‘moderate’ overshoot” of the 2% target. But ” I would not consider a repeat performance next year a policy success”. Also, risks to inflation outlook are “to the upside”.

Full speech here.