Fed’s Mester Says Economy on Track for a March Rate Rise

Table of Contents

Federal Reserve Bank of Cleveland President Loretta Mester responds to questions about the inflation outlook and what policy moves the Fed may need to make as it confronts price pressures, at WSJ’s CFO Network Summit.

Federal Reserve Bank of Cleveland President

Loretta Mester

said Wednesday the U.S. central bank is on track to raise its short-term interest-rate target at its March policy meeting.

With inflation high right now, “the case is very compelling” for the Fed to move toward raising its short-term target rate, Ms. Mester said in a virtual appearance Wednesday at The Wall Street Journal’s CFO Network Summit.

“We need to take action to make sure” that inflation goes down and the public’s expected path of inflation remains consistent with the Fed’s 2% target, Ms. Mester said. “If things looked like they do today in March I would support raising, lifting off from zero at that point,” she said. The official reiterated she believes the Fed will raise rates three times in 2022.

The Federal Reserve Bank of Cleveland president says there is a good case for reducing the Fed’s balance sheet “as fast as we can conditional on it not being disruptive” to the functioning of the financial markets, at WSJ’s CFO Network Summit.

Ms. Mester is a voting member of the rate-setting Federal Open Market Committee this year due to the rotation of regional Fed leaders on that panel. She spoke in the wake of the release of consumer level inflation data that showed the highest levels of price pressures since 1982.

An inflation surge of unexpected magnitude and duration has brought about a fast change in the outlook for central-bank policy. The Fed has accelerated the drawdown of its bond-buying stimulus effort, putting it on a path to end those purchases in March, and a number of central-bank officials expect the Fed will also be able to boost its near-zero interest-rate target range at that spring gathering.

In the appearance, Ms. Mester didn’t say when she would like to see the Fed start shrinking the size of its balance sheet as part of its withdrawal of support. She said she would like the Fed to reduce the size of its now $8.8 trillion holdings “as fast as feasible” so long as it isn’t disruptive to financial markets.

Ms. Mester said she wasn’t ready to say what path she wants the Fed to take on the balance sheet but would like all options to be explored on the way toward smaller holdings.

The Federal Reserve says it will accelerate the wind-down of its bond-buying program, the biggest step the central bank has taken in reversing its pandemic-era stimulus. Here’s how tapering works, and why it sends markets on edge. Photo illustration: Adele Morgan/WSJ

Write to Michael S. Derby at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

https://www.wsj.com/articles/feds-mester-says-economy-on-track-for-a-march-rate-rise-11642007358

Previous post Cleveland Foundation names Colette Jones as chief marketing officer
Next post Owners Propose Increased Minimum Salary, Players’ Reaction to Overall Offer ‘Not Positive’