Cleveland’s FRB President says interest rates should be hiked further

Loretta Mester, acting as the head of the Federal Reserve Bank (FRB) of Cleveland, announced the need for further monetary tightening. According to data released Tuesday, measures taken by the U.S. Federal Reserve, were insufficient to reduce inflation. 

"We are concerned about the progress lacking over inflation. To date, there has been some slowdown, but the rate is still far from the Fed's target level. In our view, monetary policy needs to be tightened through further interest rate hikes," Mester noted.

In her speech, the head of the Cleveland’s FRB said the central bank should have no illusions about inflation rates that may lead to a halt, or a complete reversal of the bank's course. 

"Given the current outlook and implications for a national economy, there is a risk of entrenching high inflation rates due to insufficient monetary tightening in the United States," she added.

With Mester claiming, inflation is expected to stabilize over time. However, her colleagues believe the contrary.

Thus, the base rate reduction is unlikely to happen in the foreseeable future. The head of the FRB stressed that her forecast remains above market expectations. While the U.S. central bank's "dot plot" indicates the rates to be in the 4.5-4.75% range by next year.

Mester received the status of the FOMC voting member this year, empowered to decide the nation's interest rates. Notably, she sees no prospects for a Fed rate cut in 2023. The FRB head noted, in turn, she would keep a close eye on the economic prospects, adjusting her own forecasts as the latest data become available.