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.”
Loretta Mester, Cleveland Fed President, states that achieving a 2.2% inflation rate would take two years.
The president and CEO of the Federal Reserve Bank of Cleveland, Loretta Mester, spoke to CNBC in an interview on Sunday to discuss America’s issues with inflation and a slowing economy. Mester says growth is “slowing to a little bit below-trend growth” but she does not believe the United States will fall into a recession. “It isn’t going to be immediate that we see 2% inflation. It will take a couple of years, but it will be moving down,” Mester said during her 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 Federal Reserve Bank of Cleveland President added:
We want to get it back on track with the supply, which has of course been limited, and alleviate some of those price pressures. This will allow inflation to move back down, and continue our goal of 2% inflation.
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.
Mester stressed the following:
We’re going to have to be very careful and nimble in how we approach this pulling back of this very accommodative monetary policy. That’s something more appropriate to the economy.
Of course, Mester’s commentary was criticized on social media and some people compared her statementsBen Bernanke (14th Chair of the Federal Reserve), stated that he didn’t see a recession in February 2008. Then, the 2008-2010 recession took place after Bernanke made his remarks. 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 Ukraine situation, which is a tragedy, has really, you know, led to that high oil prices that everyone’s feeling the brunt of and high gasoline prices,” Mester insisted. The Fed member still believes that the U.S. central banks has the ability to manage the economy and bring inflation down to the 2.2% mark. “We at the Fed are very committed to using the tools at our disposal to bring this inflation under control and getting it back to 2%. It is the number one challenge in the economy now,” Mester concluded.
What do you think about Cleveland Fed president Loretta Mester’s opinion on the U.S. economy? Is Mester correct? Or do you believe there will be a recession here in the U.S. Please comment below to let us know your thoughts.
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