Loretta Mester, Interview: Associated Press

Fed Funds

“Well, my own view is that we’re going to have to get the funds rate above 5% in order to get inflation, really on a sustained downward path to 2%.”

“So I just think we need to keep going, and we’ll discuss at the meeting how much to do at any one particular meeting. But my projections and my view of the economy is that we need to do more, we need to get above 5% and then hold it there for some time.”

“My own rate is above 5% as is, I think 17 of the 19 participants on the FOMC also had a rate above 5% in the last projection. So again, if you look at policy rules that a lot of economists like to look at, they’re all showing that we need to move the rate up into restrictive territory, meaning positive, and so we just need to continue on.”

“So all that together, I still see that the larger risk coming from tightening too little. If we don’t get inflation back down, it can impact the long run health of the economy as well as the short run health of households and businesses.”

Jobs & GDP

“So I’m anticipating we’ll see some increase in the unemployment rate, but that it’ll be less than one would typically see in an economic slowdown … I do have economic growth being well below trend.”

Sufficiently Restrictive

“But at this point (Fed Funds, 4.50%), right, we’re not at a point where we’re sufficiently restrictive. 

“But inflation moving down this year, in my forecast is contingent upon policy getting to that sufficiently restrictive stance, which in my view, is above 5%.”

Rate Cuts

“Because of their (policymaker) view of how the economy is expected to evolve, and how inflation is expected to evolve, no one thinks that it’ll be appropriate to move the funds rate down in 2023 … And of course … we acknowledge that if the economy evolves differently than we’re projecting, policy might have to be different as well.”