Federal Reserve Bank of Cleveland President Loretta Mester said policymakers will gauge the impact of banks tightening their lending standards when they meet next month to discuss the peak rate.
(Bloomberg) — Federal Reserve Bank of Cleveland President Loretta Mester said policymakers will gauge the impact of banks tightening their lending standards when they meet next month to discuss the peak rate.
“Even before the stresses in the banking industry in March, banks were already beginning to tighten their credit standards,” Mester said Thursday in an interview with Yahoo! Finance.
“The question now going forward is” Will stresses in the banking industry, those stresses in March, lead banks to move faster to tighten their credit standards,” she said.
Mester repeated she thinks the Fed’s benchmark rate will likely have to go higher than 5% in order to achieve the central bank’s 2% inflation goal.
Fed officials raised interest rates over the past year in effort to tame inflation running well above the central bank’s 2% target. Policymakers lifted borrowing costs by a quarter point last month, bringing the target on their benchmark rate to a range of 4.75% to 5%.
They are expected to move by the same amount again at their upcoming May 2-3 meeting.
Mester said so far the underlying economy has shown resilience to rate hikes. “Now we just need to make sure we get the job done on inflation,” the Cleveland Fed chief said.
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