Reuters - The U.S. Federal Reserve should raise interest rates to above 4% to bring inflation down and to keep tightening through the first half of next year, Loretta Mester, Cleveland Fed President, said on Thursday.
Mester told reporters after an event at the Economic Club of Pittsburgh in reference to the central bank's policy rate, making her one of the most hawkish members of the rate-setting committee. It's not unreasonable to maintain that as where we're going to and then we'll see. A lot of policymakers have flagged this week that the central bank is determined to press ahead with rate hikes until it sees strong and long-lasting evidence that inflation is on track back to the Fed's 2% goal, which is the reason why inflation is on track back to the Fed's 2% goal.
Mester said earlier this week she'll need to see several months of monthly declines in inflation before she feels the Fed can ease up on rates and give a more precise trajectory on how quickly she and her colleagues could get there.
Interest rates continue to rise this year and into the next year through the first half, and maybe by then we can start bringing them back down, Mester said.
The Cleveland Fed chief said she was keeping an open mind when it comes to the size of the rate hike needed at the Fed's next policy meeting on Sept. 20 - 21. The Fed Chair Jerome Powell has already indicated that it will likely be another unusually large lift in borrowing costs.
It's not unreasonable to think we might have to do a 75 basis point move but I can imagine it could be a 50. Mester said we'll have to look at the data as it comes in.