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The US Federal Reserve is “just at the beginning” of raising interest rates to control inflation, the president of the institution’s Cleveland bank said.
Loretta Mester said she wants to see the benchmark lending rate reach 3 per cent to 3.5 per cent this year and “a little bit above 4 per cent next year” to rein in price pressures even if that tips the economy into a recession.
“There are risks of recession,” Mester said in an interview on CNBC on Wednesday. “We’re tightening monetary policy. My baseline forecast is for growth to be slower this year,” but not a recession.
The remarks shed light on the speed at which the Fed is acting to curtail inflationary forces in the economy. Mester said the US isn’t yet suffering a “wage-price spiral,” but that it’s important for policy makers to ensure those conditions don’t bed into people’s expectations.
“Consumers are experiencing this very, very high inflation, and that’s clouding their confidence in the economy,” Mester said. “We’re in a path now to bring our interest rates up to more normal levels, and even restrictive levels, so we can get that inflation rate down and sustain a good economy going forward. Job one now is getting inflation under control.”