Fed's Mester: Would need to see compelling slowdown of inflation before slowing rate rises

Cleveland Fed Pres. Loretta Mester is saying:

• Will need to see compelling a slowdown of inflation before slowing Fed rate increases
• inflation risks can skewed to the upside and argument for doing more upfront
• after have point increases in June and July, Fed will have to see what more is needed based on a data in the meantime
• Expects PCE 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 might be back to around 2.5% in 2023

Tomorrow, the CPI data in the US will be released at 8:30 AM ET. The expectations are for the headline on the month to rise by 0.2% and the core ex food and energy to rise by 0.4%. Year on year the headline is expected to dip from 8.5% to 8.1% while the ex food and energy is expected to fall from 6.5% to 6.0%.

A year ago, the MoM came in at +0.8%. With the expectations at 0.2% (a -0.6% YoY decline from the 0.8% last year), the decline from 8.5% to 8.1% has the potential to be lower.

If you were to add the MoM over the last 12 months (see numbers on the chart below), the total of the MoM digits comes in at 8.3%. If you were to replace 0.2% for 0.8% this month (the expected rise this month), the sum of the monthly digits would come in at 7.7% well below the 8.1% estimate.

There seems to be room for the possibility of a sub 8% YoY number for the headline number if the number comes in at the expected 0.2%.

Looking at the core measure (ex food and energy (see MoM numbers below), the expectation of 0.4% would replace a gain of 0.9% last year (-0.5%). If last month YoY calculation was +6.5%, that would imply a rate of 6.0% (0.9% replaced by 0.4% which is the estimate).

Summing the MoM gains for 12 months currently (see core month on month numbers below), the numbers add up to 6.2%. If 0.4% replaces 0.9% from last month, the sum of the months would be 5.7%. There is the potential for a lower number if the number comes in as expected.