Fed’s Mester Says ‘Everything’ on the Table for June Rate Action

Catarina Saraiva, Bloomberg News

Loretta Mester, president and chief executive officer of the Federal Reserve Bank of Cleveland, speaks during a Bloomberg Television interview at the Jackson Hole economic symposium in Moran, Wyoming, US, on Friday, Aug. 26, 2022. Federal Reserve Chair Jerome Powell signaled the US central bank is likely to keep raising interest rates and leave them elevated for a while to stamp out inflation, and he pushed back against any idea that the Fed would soon reverse course. , Bloomberg

(Bloomberg) -- Federal Reserve Bank of Cleveland President Loretta Mester said she wouldn’t rule out raising interest rates again next month after disappointing progress on inflation.

“Everything is on the table in June,” Mester, who doesn’t vote on rate decisions this year, said Friday in an interview on CNBC. “Inflation is still too high and it’s stubborn.”

Data released earlier Friday showed the personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose a faster-than-expected 0.4% in April and was up 4.4% from a year ago — more than double the central bank’s 2% target.

“The data that came in this morning suggests we have more work to do,” she said.

Mester repeated that she doesn’t think the economy is in a place where it’s equally probable that the next move in the fed funds rate could be an increase or decrease.

She also emphasized that there a few key data reports due before the Fed’s June 13-14 meeting, including looks at May jobs and inflation reports that she’ll be assessing carefully.

Fed officials were split at the meeting earlier this month between whether another rate increase in June will be necessary or not. Some policymakers have expressed support for further tightening even if they opt to skip the June meeting.

The Fed has hiked rates by 5 percentage points in the past 14 months, including four large 75-basis-point increases last year, in an effort to cool inflation. Chair Jerome Powell said last week the US central bank can now afford to take some time to see how that policy is working itself through the economy.

Mester said that while the economy has slowed some since last year, it has remained resilient. Sticky services prices, a key component the Fed is watching, haven’t shown much progress.

“Right now, when I look at the data and I look at what’s happening with inflation numbers, I do think we’re going to have to tighten a bit more,” she said.

The Cleveland Fed chief also said that while bank conditions have been tightening since last year, she hasn’t heard from the institutions in her district that they’ve been further reducing lending following the collapse of four banks in the past few months.

(Updates with more Mester comment from fifth paragraph.)