Federal Reserve Bank of Cleveland President Loretta Mester stated on Tuesday that the U.S. central bank will likely raise interest rates again, despite indications that recent banking sector issues have been contained.
Mester sees monetary policy moving “somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time” to keep inflation on a sustained downward path to 2% and inflation expectations anchored.
“Precisely how much higher the federal funds rate will need to go from here and for how long policy will need to remain restrictive will depend on how much inflation and inflation expectations are moving down, and that will depend on how much demand is slowing, supply challenges are being resolved, and price pressures are easing,” Mester said in a speech in New York.
The federal funds rate was increased by 25 basis points during the March meeting, bringing the target range to 4.75%-5%.
“In my modal projection, to put inflation on a sustained downward trajectory to 2% and to keep inflation expectations anchored, monetary policy moves somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time,” she said.
Her remarks were made despite the number of job openings falling below 10 million in February for the first time in over two years, an indication that the Fed’s efforts to slow the labor market may be having an effect.
