Fed's Mester stands by the forecast of three rate cuts this year
Cleveland Fed President Loretta Mester commented in a speech on Monday that the Federal Reserve has achieved significant advancements in addressing disinflationary pressures. However, she acknowledged that the inflation rate continues to exceed the targeted 2%. Inflation for January and February was more stubborn than in the second half of last year, the challenging and fluctuating nature of the disinflationary process.
Mester also mentioned that she had adjusted her forecast for economic expansion this year to slightly surpass 2%. Moreover, she anticipated that the labor market would experience elevated levels of unemployment. Additionally, Mester informed that she adjusted her perspective on the longer-term federal funds rate during the FOMC meeting, revising it to 3% from her previous projection of 2.5%.
"If we decrease interest rates prematurely or rapidly, without substantial evidence to assure us that inflation is steadily and promptly moving towards 2%, there is a danger of reversing the strides we have made in controlling inflation," stated Mester. She further emphasized, "Currently, I believe the greater risk lies in initiating a reduction of the funds rate too soon." The Federal Reserve is not anticipated to gather sufficient confidence to determine rate cuts during the upcoming FOMC meeting, However, circumstances could potentially shift during the June meeting.
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