(Bloomberg) -- Federal Reserve Bank of Cleveland President Loretta Mester said the US central bank has more work to do to tame inflation and she has not seen the evidence needed to convince her that the officials should slow the pace of interest-rate increases.
“We have to bring interest rates up to a level that will get inflation on that 2% path, and I have not seen the compelling evidence that I need to see that would suggest that we could start reducing the pace at which we’re going,” Mester said Thursday during a virtual event organized by the Council for Economic Education.
Fed officials are raising interest rates at the fastest clip in decades as they work to squelch stubbornly high inflation. Policy makers lifted rates by 75 basis points last month to a target range of 3% to 3.25% and median projections show they anticipate rates will go to 4.4% by the end of this year. That implies a further 1.25 percentage points of tightening over their remaining two meetings in November and December.
Mester repeated that she forecasts the US central bank will need to push rates slightly higher than many of her colleagues anticipate because she expects high inflation to persist. She said she didn’t expect the Fed to cut rates at all next year.
Mester, a voter in monetary policy decisions this year, said bringing inflation down is the Fed’s top job, noting that many Americans are suffering from having to spend more money on essentials such as gas and food.
Policymakers say they will do what it takes to get inflation under control, even if their efforts cause pain for businesses and households. Fed officials project the unemployment rate may rise to 4.4% from the current rate of 3.7%, which is near a 50-year low. The Labor Department will issue a fresh monthly update on the US job market on Friday.
In addition to raising rates, the Fed is reducing the size of its balance sheet by letting some bond holdings run off the portfolio as they mature. Mester said the process is working smoothly so far.
Asked about financial conditions, Mester said that markets are functioning well so far in the US. She contrasted that with the financial stability issues in European markets that recently motivated the Bank of England to begin purchasing bonds.
©2022 Bloomberg L.P.