Loretta Mester, Interview: CNBC

Pause

“Well, I think we’re entering a period now where the Fed policy, the funds rate is just entering a restrictive stance. So that’s the way I like to think about it.  We moved rates up very expeditiously, we did four 75 basis point raises in a row, we’re up 375 basis points on the year.  And right now we’re at a point where we are going to enter a restrictive stance of policy.  At that point, I think it makes sense that we can slow down a bit, the pace of increases.  We’re still going to have to raise the funds rate, but were at a reasonable point now where we can now be very deliberate in setting monetary policy to get back to price stability and be more judicious in balancing the risks so as to minimize that pain of that journey back to price stability.  And so, that’s how I see the next phase of policy.”

Inflation

“But I am thinking that we need to see more positive news on the inflation front.  I’m very grateful that we’ve seen some of that.  I think policy is beginning to do its work and of course our policy, by tightening monetary policy our aim is to slow down and moderate demand so it becomes into better balance with supply, both in product markets and in labor markets so that we don’t leave any price pressures.  I think we’re beginning to see some of that working.  We’ve certainly seen a broader tightening in financial conditions.”

Fed Funds

“My view is that we are just basically entering restrictive territory and then we’ll have to see.  We need to bring rates up further, I believe and we said that in our last FOMC statement at our last meeting in early November, that we expected the Fed funds rate will have to move up further.  And then we have to be judicious about evaluating and letting the economy tell us, you know, is inflation indeed moving down in a timely way or do we have to even more rates higher and where will that be.”

“I think we can slow down from the 75.”