Cleveland Federal Reserve President Loretta Mester said Thursday that this week’s news showing lower levels of inflation is not enough to convince her that the central bank has won its battle against higher prices.
“We’re making progress on inflation, clear progress. We need to see more of that,” Meester told CNBC’s Steve Liesman during an interview on “The Exchange.” “We need to see more evidence that inflation has returned to 2% in time. But we have really good evidence that it has made progress and that’s where it is now, right?”
In separate reports, the Labor Department said consumer prices in October were unchanged from the previous month, while wholesale prices actually fell 0.5%.
While the producer price index fell below the Fed’s 2% 12-month inflation target, the consumer price index was still at 3.2%, and excluding food and energy, was even higher at 4%.
Following the reports, market pricing in the futures market completely eliminated the possibility that the Fed would approve any additional interest rate hikes. Moreover, the market is now pricing in the equivalent of a four-quarter percentage point rate cut next year, according to CME Group estimates.
But Mester said she was reserving judgment on where policymakers go from here.
“I haven’t weighed in yet. I think where we are right now, basically, we’re in a very good place for policy,” he said.
Likening the Fed’s situation to navigating a ship, Meister said, “We’re over a crow’s nest. What does the crow’s nest let you do? It lets you look over the horizon and see where the data Where it’s coming from, where the economy is coming from is growing. And then we have to look at: Is it growing the way we predicted?”
The next meeting of the Federal Open Market Committee will be held on December 12-13.
Meister, who gets a vote on the committee in 2024 but will retire in mid-year after meeting the Fed’s service time limits, said she hasn’t made up her mind about what she thinks. Where should the rates go?
He said, “My feeling is that this is not really about cutting rates. This is really about how long we will remain in a restrictive stance and given what is happening in the economy “Maybe we need to go to a higher level.”