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Federal Reserve Bank of Cleveland President Loretta Mester said it was premature to consider cutting interest rates as soon as the US central bank’s March meeting, emphasizing that fresh inflation data suggests policymakers have more work to do.
“I think March is probably too early in my estimate for a rate decline because I think we need to see some more evidence,” Mester, who votes on interest-rate decisions this year, said Thursday in an interview with Michael McKee on Bloomberg TV. “I think the December CPI report just shows there’s more work to do, and that work is going to take restrictive monetary policy.”
As policymakers see more evidence inflation is on a sustainable path to 2%, “we’ll have that conversation,” she added, also citing inflation expectations as an important factor.
Government data released Thursday showed inflation picked up in the year through December, reflecting higher housing costs and an unexpected increase in used vehicle prices. The consumer price index rose 3.4% from a year earlier, the most in three months, while prices excluding food and energy cooled only slightly less than forecast to 3.9%.
Mester said the latest figures reinforced her view that policy is in a good position to assess incoming data on prices and employment.
“Obviously we don’t want to see the progress in inflation stall out but I don’t think this report suggests that’s happening,” she said. “It just suggests we have more work to do, and we’re committed to doing it.”
Fed officials raised rates to a range of 5.25% to 5.5% in July, a 22-year high, but have left policy unchanged since then as inflation has continued to cool. None of the 19 policymakers see rates moving higher, according to economic forecasts released following their December meeting, signaling the next policy move is likely a rate cut.
Mester was among officials who in December forecast three rate cuts in 2024, she told the Financial Times in an interview published Dec. 18. At the time, she said markets were “a little bit ahead” of where policymakers saw rates headed this year.
The Cleveland Fed chief, a vocal supporter of boosting interest rates over the past two years, will vote on this year’s Federal Open Market Committee until she steps down as president of the bank in June, when her tenure ends.
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Published: 11 Jan 2024, 11:02 PM IST
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