US Federal Reserve System has yet to fight inflation

On Tuesday, Head of the FRS department in Cleveland Chair Loretta Mester declared that this year even with a modest increase in credit rates, the central bank still has to keep a hold of inflation. That’s why it is necessary to tighten monetary policy.

In her statement at the Economic Club of New York meeting, Mester said high inflation stays a major issue for the US economy. Despite a stable situation on the demand side and enhancement on the supply side, zero progress has been reached on the inflation issue.

According to Mester next year, the inflation rate should fall to 3.5%, and in 2025 reach the target of 2%. Compared to the previous year, in August, the PCE price index was 6.2%. This index is the preferred indicator of price pressure.

Mester also added that since growth will be below the trend over the next few years, this could cause a recession in the US economy. All this is necessary, despite the difficulties, since high inflation negatively affects the economy.

Giving the comments to press Mester said there were no indications of issues and disorderly functioning in the financial markets, and the FRS was checking their activity.