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The Fed “got the persistence and magnitude wrong” of inflation — Loretta Mester

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The Fed “got the persistence and magnitude wrong” of inflation — Loretta Mester

Federal Reserve Bank of Cleveland President Loretta Mester said the Fed’s average path does not foresee a recession, but a “pretty big” slowdown in growth

Highlights

Trade-offs with growth will be more relevant as inflation comes back down.

Given the persistence of inflation, the fact that the Fed does enough continues to weigh more heavily.

The Fed “misunderstood” the persistence and magnitude of inflation.

Earlier, he said Thursday in an interview on CNBC that “real interest rates – judged by expectations about inflation next year – have to be in positive territory and stay there for a while.”

“We are not in the restricted funds rate territory yet,” he added.

In September, the dollar reached its highest level in the last 20 years, following the decision of the Fed authorities to raise interest rates by 75 basis points on September 21, at their third consecutive meeting, placing the objective of the benchmark federal funds rate in a range of 3% to 3.25%.

Source: Fx Street

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