Loretta Mester Voices Caution Amidst Lower Inflation Reports, Undecided on Future Rate Moves

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Cleveland Federal Reserve President Loretta Mester emphasized on Thursday that despite recent reports indicating lower inflation levels, she remains unconvinced that the central bank has definitively triumphed over the challenge of rising prices.

Loretta Mester Voices Caution Amidst Lower Inflation Reports, Undecided on Future Rate Moves
Loretta Mester Voices Caution Amidst Lower Inflation Reports, Undecided on Future Rate Moves ( Photo: Bloomberg.com )

Loretta Mester iterated the need for more tangible progress in the fight against inflation, stating, “We’re making progress on inflation, discernible progress. We need to see more of that”

This week’s data from the Labor Department revealed that consumer prices held steady in October, with wholesale prices experiencing a 0.5% decrease. Although the producer price index fell below the Fed’s 2% 12-month inflation target, the consumer price index remained at 3.2%, rising to 4% when excluding food and energy.

In response to these findings, the futures market swiftly adjusted, eliminating the likelihood of the Fed approving further interest rate hikes. Market expectations now indicate the potential for four-quarter percentage point rate cuts in the coming year, according to a CME Group gauge.

However, Loretta Mester remains circumspect about the future trajectory of monetary policy. Drawing an analogy to navigating a ship, Loretta Mester likened the Fed’s current position to being at the crow’s nest, allowing for a vigilant observation of the economic horizon.

As the Federal Open Market Committee prepares to convene on December 12-13, Loretta Mester, who holds a voting position until 2024, expressed uncertainty about the direction rates should take

Despite market expectations, she cautioned against a focus solely on rate cuts, emphasizing the importance of evaluating the duration of a restrictive stance based on economic developments. Loretta Mester, set to retire midyear after reaching the Fed’s time-served limit, underscored the significance of assessing whether the economy aligns with the committee’s forecasts.

 

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