Cleveland Fed chair expects rate hikes to continue

By Ovunc Kutlu

ANKARA (AA) - The head of the Cleveland Federal Reserve Bank said Thursday that she expects rate hikes to continue to keep pressure on inflation.

Loretta Mester said the Fed is weighing the risks of tightening too much against too little in monetary policy and noted that while the former would slow the economy more than necessary, the latter would allow high inflation to persist.

Mester said she thinks there are higher risks stemming from tightening monetary policy too little.

"As policy moves further into restrictive territory, the effects of our cumulative tightening will work through to the broader economy, and I anticipate that we will see inflation pressures ease," she said during a speech at Princeton University.

She said high and persistent inflation remains a major challenge for the American economy and overall financial conditions are tighter compared to the beginning of the year.

"In order for inflation to fall, there will need to be further slowing in product and labor markets, bringing demand into better balance with supply to alleviate price pressures. We are beginning to see demand in product markets slowing, partly in response to higher interest rates," she said.

Mester noted that lowering inflation and achieving price stability will take time and will not be "without some pain.”

"We will need to be very diligent in setting monetary policy to return the economy to price stability and be judicious in balancing these risks to minimize the pain of the journey,” she said.

Mester has a voting right in the Federal Open Market Committee (FOMC) this year.