Cleveland Fed President Loretta Mester said Thursday that this week’s news of falling inflation levels is not enough to convince the central bank that it has won the fight against high prices.
“We’re making progress on inflation, we’re seeing clear progress, and we need to see more of that,” Mester told CNBC’s Steve Reisman in an interview on “The Exchange.” “We will need to see further evidence that inflation is on track for a timely recovery to 2%, but there is really good evidence that inflation is progressing and it is now It just continues.”
In a separate report, the Labor Department said consumer prices were flat in October compared to the previous month, but wholesale prices actually fell by 0.5%.
Although the producer price index was below the Fed’s 12-month inflation target of 2%, the consumer price index remained at 3.2%, and even higher at 4% excluding food and energy.
Following this report, futures market pricing completely eliminated the possibility of the Fed approving any further rate hikes. Additionally, CME Group indicators show that the market is currently pricing in a four-quarter percentage point rate cut next year.
But Mester said he is reserving judgment on where policymakers will go next.
“We haven’t evaluated it yet. What we think at the moment is that we are fundamentally in a very good position for policy,” he said.
Mr. Mester compared the Fed’s position to steering a ship, saying, “We’re in the crow’s nest. What can we do in the crow’s nest? We look out to the horizon and see where the data is coming from, where the economy is coming from.” We can see if it will come,” he said. And we need to see if it’s going the way we predicted. ”
The Federal Open Market Committee will next meet on December 12-13.
Mr. Mester, who will receive a vote on the committee in 2024 but plans to step down mid-year after reaching the Fed’s term limit, said he has not yet decided where he thinks interest rates should go.
“My sense is that it’s not really about cutting rates. It’s really a question of how long we maintain a restrictive stance, and given what’s going on in the economy, it’s probably a matter of raising rates. I will have to do it,” he said.