Federal Reserve Bank of Cleveland President Loretta Mester said US inflation remains too high despite recent improvements, and the labor market is still strong.
(Bloomberg) — Federal Reserve Bank of Cleveland President Loretta Mester said US inflation remains too high despite recent improvements, and the labor market is still strong.
Policymakers need to closely monitor markets and economic data to assess how the economy is evolving to inform their future policy decisions, Mester said Friday in remarks prepared for a research conference hosted by the Cleveland Fed and the European Central Bank in Frankfurt. She did not specify whether she thinks another interest-rate increase is needed or what she believes the Fed should do at its Sept. 19-20 policy meeting.
“Although there has been some progress, inflation remains too high,” she said. “The monetary policy questions are whether the current level of the federal funds rate is sufficiently restrictive and how long policy will need to remain restrictive to keep inflation moving down in a sustainable and timely way to our goal of 2%.”
Fed officials lifted their benchmark rate in July to a range of 5.25% to 5.5%, the highest level in 22 years. The move came after policymakers held rates steady in June as part of an effort to slow the pace of their tightening campaign.
Mester, speaking after Friday’s US employment report showed the jobless rate rose to 3.8% in August, said the central bank’s actions are helping the labor market come into better balance, “but the job market is still strong.”
“Future policy decisions will be about managing the risks and the intertemporal costs of over-tightening versus under-tightening monetary policy,” she said.
Fed Chair Jerome Powell stressed during last month’s annual central banking conference in Jackson Hole, Wyoming, that officials aren’t done fighting inflation and could raise interest rates further should the economy and inflation fail to cool.
Mester, who does not vote in monetary policy decisions this year, said last month that policymakers probably have more work to do to bring the inflation rate on a steady path back to 2% and that it would be a worse mistake to under tighten than to over tighten policy.
(Adds additional Mester comments in fifth paragraph.)
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