Fed: More force will be needed if inflation expectations become unanchored – Mester

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“If inflation expectations become unanchored, monetary policy would have to act more forcefully to return inflation to the target,” said the president of the Cleveland Federal Reserve, Loretta Mesterin his presentation at the annual forum of the European Central Bank on Wednesday.

Mester said that a high-cost mistake is to assume that inflation expectations are anchored, when they are not. “There is some risk in the United States that long-term inflation expectations of businesses and households will continue to rise,” she said.

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The official indicated that they cannot be complacent with an increase in long-term inflation expectations. She expressed that central banks must act with great decision and intention to reduce inflation.

The current inflation situation is very challengingMester said. He warned that changes in fuel and food prices could have “an outsized effect on household inflation expectations.”

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The president of the Cleveland Fed expressed that the communication of the policy is important to keep inflation well anchored.

Later on Wednesday, from the ECB forum in Portugal, there will be a panel discussion involving Powell, Lagarde and Bailey.

Source: Fx Street

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