By Michael S. Derby
NEW YORK (Reuters) – Federal Reserve Bank of Cleveland President Loretta Mester said on Thursday holding U.S. central bank policy at current levels will help get still-high inflation back to the 2% target.
“Monetary policy is well positioned for risk management as we gather more evidence on how the economy is evolving,” Mester said in the text of a speech prepared for delivery before a gathering held by the Wayne Economic Development Council, in Wooster, Ohio.
“The most likely scenario for the overall economy and that of the region is that the current restrictive stance of monetary policy will continue to help moderate growth and labor market conditions and that this moderation will contribute to the further easing of price pressures,” Mester said. She added, “I expect progress on inflation over time, but at a slower pace than we saw last year.”
Mester is a voting member of the rate-setting Federal Open Market Committee, which meets next month in a gathering most expect will result in officials maintaining their overnight target rate range at between 5.25% and 5.5% while they seek additional evidence that inflation pressures are waning. Mester is set to retire from her bank at the end of June.
Mester said risks to inflation have risen and risks to weaker growth and hiring have diminished, which means in a strong economy the Fed has the space to look for more evidence inflation is moving back to target before cutting rates.
Mester said the lack of progress on getting inflation down has been “disappointing” and added “I now believe that it will take longer to reach our 2% goal than I previously thought.” She also said softer April consumer level inflation data was a welcome thing to see.
(Reporting by Michael S. Derby; Editing by Andrea Ricci)
