Cleveland Federal Reserve Bank president Loretta Mester doesn’t think a recession will take place in the United States but believes it will take two years to get inflation back down to 2%. While speaking during an interview on Sunday, Mester explained that while it will take two years, inflation “will be moving down.”
It will take 2 years to reach 2% inflation, says Cleveland Fed President Loretta Mester
Federal Reserve Bank of Cleveland President and CEO Loretta Mester sat down with CNBC in an interview on Sunday to discuss US issues with inflation and a slowing economy. Mester says growth is “slowing a bit below trend growth,” but she doesn’t think the United States will fall into a recession. “We’re not going to see 2% inflation anytime soon. It will take a few years, but it will decrease,” Mester said during his interview.
Mester explained that the Federal Reserve will be looking for evidence that inflation is being tamed by the central bank’s policy. “We’re going to be looking for the month-to-month changes in inflation rates to get some really good evidence on whether we’ve seen inflation first stabilize and then begin to move back down,” Mester explained. “It is going to take a while to get inflation back down to 2%. But what we’re looking for is that we can see some moderation in demand, which has been incredibly strong.”
The President of the Federal Reserve Bank of Cleveland added:
Bringing it back into line with supply, which of course, as you know, has been limited, easing some of those price pressures, bringing inflation down and getting back on a sustainable 2% path, which is our inflation target.
While Mester Is ‘Not Predicting a Recession,’ She Believes ‘Recession Risks Are Going Up’
When asked if the U.S. would head into a recession, Mester said she is “not predicting a recession.” The Cleveland Fed branch president said that growth was slowing, the unemployment rate was moving up “a little bit,” and the Fed is seeing American “households really shifting some of their spending.” The rate hikes the Fed has been implementing have already had an effect on the housing market, Mester noted. However, Mester said that the Fed needs to be cautious about tapering back the central bank’s policy.
Master pointed out:
We will have to be very careful and agile in our approach to this withdrawal of this very accommodating monetary policy. It is something more appropriate to the economy.
Of course, Mester’s commentary was criticized on social media and some people compared her statements to when the 14th chair of the Federal Reserve, Ben Bernanke, said he did not see a recession coming in February 2008, and then the 2008-2010 recession came to fruition after his statements. While Mester doesn’t predict a coming recession, she says that “recession risks are going up.” The Cleveland Fed branch president detailed that besides the Fed’s monetary policy and interest rate hikes, “there’s a lot of other things going on as well.”
“The situation in Ukraine, which is a tragedy, has really, you know, led to these high oil prices that everyone is feeling the brunt of and high gasoline prices,” Mester insisted. Still, the Fed member believes the US central bank has what it takes to tame the economy and bring inflation down to 2%. “We at the Fed are very committed to using the tools at our disposal to get this inflation under control and down to 2%. This is the number one challenge of today’s economy,” Mester concluded.
