US’ Cleveland Fed head supports faster rate hikes amid high inflation

US’ Cleveland Fed head supports faster rate hikes amid high inflation

FOMC voting member says increases in federal funds rate needed in coming months

By Ovunc Kutlu

ANKARA (AA) - The US Federal Reserve Bank of Cleveland President Loretta Mester indicated Wednesday that she supports faster interest rate increases by the central bank amid record-high inflation.

"I anticipate that it will be appropriate to move the funds rate up at a faster pace because inflation is considerably higher and labor markets are much tighter than in 2015," she said via videoconference at the European Economics and Financial Centre Distinguished Speakers Seminar.

"In my view, increases in the fed funds rate in the coming months will be needed, but the ultimate path of the fed funds rate in terms of the number and pace of increases will depend on how the economy evolves," she added.

US consumer prices in December were up 7% year-on-year, marking the highest annual increase in almost 40 years. The increase for January, which will be announced Thursday, is expected to come in at 7.3%.

"Currently, the imbalances between demand and supply in product and labor markets are contributing to the very high inflation readings. Firms tell us that they are having little trouble passing on their higher costs to their customers," explained Mester, who is a voting member of the Federal Open Market Committee (FOMC) this year.

She noted that the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation indicator, reached 5.8% in December and core PCE inflation climbed to 4.9% -- both at their highest since the early 1980s.

Mester said she expects US inflation to moderate but remain above 2% this year and next but added that her forecast is based on the FOMC taking appropriate action.


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