Fed's Mester
Fed's Mester

Cleveland Fed President Loretta Mester on the economic outlook:

  • Doesn't see case to cut at the next Fed meeting
  • Fed policy in a good place to navigate risks
  • Fed can cut rates gradually if economy meets expectations

Mester is a hawk but she's not exactly hawkish here. If anyone was going to say it was time to think about holding all year or hiking, it would be her or Bowman.

  • Bigger risk to policy is to cut rates too soon
  • Strong economy gives Fed space to take stock before cutting rates
  • Does not expect smooth path back to 2% inflation
  • Risks to economic outlook have become more balanced
  • New sees longer-run Fed funds at 3.0% vs 2.5%
  • Now sees GDP just above 2% this year
  • Sees labor market in better balance.
  • In her view, the inflation picture hasn't changed much this year. She had assumed slower progress on inflation
  • Says her forecast is similar to the median in the SEP