Loretta Mester

President of the Cleveland Federal Reserve Loretta Mester has said it is too early to tell if the Fed will need to raise its benchmark overnight interest rate at its next policy meeting in early May, despite her prediction that rates will need to rise.

In response to a question on Bloomberg Television regarding the likelihood of a 25-basis-point rate hike at the May 2-3 meeting, Mester stated, “We have a lot more data to get to and we’ll see as we get there what is happening in the economy,”

Mester made her remarks a day after delivering a speech in which she predicted the Fed’s policy rate would rise above 5% and the real fed funds rate would remain in positive territory for an extended period of time.

She reiterated her position on the need to “go a little bit higher” to combat inflation on Wednesday.

Late in March, the U.S. central bank raised its policy rate by a quarter of a percentage point to a range of 4.75 percent to five percent, but indicated it was close to its maximum rate after banking sector troubles raised expectations of a further tightening in financial conditions as lending standards become more stringent.

Mester and her fellow policymakers are attempting to return inflation to the Fed’s 2% objective without triggering a recession.

The majority of Fed policymakers signaled at their March meeting that they expected to need to raise rates one more time, to 5.1%, and not reduce them until 2024. Mester has stated that she continues to anticipate “somewhat more persistent” inflation than her colleagues’ median projection.

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