Cleveland Fed President Loretta Mester said yesterday, “I believe it will be appropriate to move the funds rate up in March and follow with further increases in the coming months.”
“If by mid-year, I assess that inflation is not going to moderate as expected, then I would support removing accommodation at a faster pace over the second half of the year,” she added.
Mester still expects inflation to remain above 2% this year and next. Moderation in inflation is “conditioned on the FOMC taking appropriate action to transition away from the current emergency levels of accommodation.”
“We will need to convey the overall trajectory of policy and give the rationale for our policy decisions based on our assessment of the outlook and risks around the outlook, which are informed by economic and financial developments,” Mester said. “This change in communications will provide a better sense of the FOMC’s policy reaction function and should not be interpreted as the FOMC backing away from transparency.”
