Cleveland Federal President Loretta Mester said, “at this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time to be sufficiently restrictive to ensure that inflation is on a sustainable path back to 2%.”
“Setting aside what financial market participants expected us to do, I saw a compelling economic case for a 50-basis-point increase, which would have brought the top of the target range to 5%,” she said.
“It is welcome news to see some moderation in inflation readings since last summer, but the level of inflation matters and it is still too high,” She said. Adding that the January CPI data “showed a jump in the monthly rate of overall inflation and no improvement in underlying inflation”
Mester said “I continue to see the risks to the inflation forecast as tilted to the upside for a number of reasons.” She also said “the transition back to price stability will take some time and will not be without some pain.”
The impact of Fed policy actions “will result in growth well below trend this year and some cooling off in labor markets, with slower employment growth and an increase in the unemployment rate from its very low level.”
