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Fed Mester: Monetary policy needs to be in a restrictive stance

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Cleveland Fed President Loretta Mester said yesterday, “when there is uncertainty, it can be better for policymakers to act more aggressively because aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about.”

“Further increases in our policy rate will be needed,” Mester said. “In order to put inflation on a sustained downward trajectory to 2%, monetary policy will need to be in a restrictive stance, with real interest rates moving into positive territory and remaining there for some time.”

“There will be some pain and bumps along the way as the growth in output and employment slow and the unemployment rate moves up,” Mester said. “But the current persistent high inflation is also very painful for many households and businesses. “

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