Cleveland Fed Pres: Inflation Staying Above 2% ‘Well Beyond 2025’ Is ‘in the Cards Now in Terms of the Forecast’

During an interview with Bloomberg on Friday, Cleveland Federal Reserve Bank President Loretta Mester stated that she doesn’t want to entertain inflation remaining above 2% for longer than needed due to under-tightening and she wouldn’t want to see the timeline for inflation getting back to 2% “pushed out well beyond 2025, which is kind of in the cards now in terms of the forecast.”

Mester said, “We’re going to get more data in before September, of course. But when you think about sort of what has changed between June and now, we have a bit stronger growth than a lot of us had thought. We have gotten inflation down. But, as the chair said, two months’ data is not enough to be convinced that it’s coming down. And, then we have higher long-term rates, which is going to put some downward pressure on inflation. That said, in my view, I think that really under-tightening would be a worse mistake than over-tightening a little bit, because we can course-correct that. Under-tightening means that inflation could remain higher for longer than 2% for a little bit longer. And I don’t think that’s something I would want to entertain. The way I think about it is, I look at sort of our time path for getting inflation back to 2%, I wouldn’t want to see that pushed out well beyond 2025, which is kind of in the cards now in terms of the forecast. So, I’m going to be very cognizant of that when I put in my new forecast for the next meeting.”

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