Fed's Mester: Does not believe we are in a recession

Fed's Mester is speaking with the Washington Post.

She says:

• she does not believe we are in a recession
• US labor market is very healthy right now
• We have not seen inflation cool at all
• Growth will be below trend this year
• The Fed is committed to bring inflation under control
• currently you have to take Fed's models with some caution
• Real important to augment models with other information
• we are starting to see slow down in investment, consumer spending and housing
• usually that starts happening alongside a weakening labor market, but that's still very strong
• we have more work to do as we not seen a turn inflation.
• Wants to see inflation to move down on a sustainable basis
• we need to make sure inflation expectations don't become entrenched
• price stability is the bedrock of a strong economy
• we might see inflation remain high and the services economy
• haven't seen anything that suggests inflation even leveling off yet
• I think will see some increase in unemployment as we go through the cycle but we need that to happen to make sure we get back to price stability
• we have a narrow path to not sparking a large rising layoffs
• inflation is not going to come down quickly
• my forecast is for below trend growth this year and probably into next year

Earlier today San Francisco Fed Pres. Daly poured water on the idea that inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term coming down saying inflation is no where near being beat. Meanwhile, the market is pricing in a decline in rates next year (see Fed protection chart below). Fed officials seem to be pushing back against this idea.

Fed's Powell after the meeting said that the Fed was more data dependent going forward.

With oil down, gas prices down, commodities down, and firms like Walmart and Target warning about higher than expected inventories, the market took the chair's word as gospel. Lower inflation readings may not have to get the CPI rate down to 2% - mathematically YoY inflation is a 12 month accumulation of one month changes so that is not going to happen. However, a string of small gains and potentially declines in MoM CPI data could see chunks of the CPI start to come off without getting to 2% for a while.