Cleveland Fed President: No Need to Stop Rate Hikes.

Loretta Mester, president of the Federal Reserve Bank of Cleveland, believes that the US needs to take action to control inflation and has urged for another interest-rate hike. In a recent interview with the Financial Times, Mester stated that there was no “compelling” reason to wait for another rate hike, and that more must be done to bring inflation under control.

Some Fed policymakers have suggested that they would skip another rate hike in June in order to assess the impact of the central bank’s policy on inflation, before raising rates again at a later date. Others have indicated that the central bank does not need to tighten the money supply any further. However, Mester believes that the risks of doing too little outweigh the risks of doing too much.

Debt-Limit Agreement Relieves Uncertainty on US Economy

Mester also commented on the recent agreement between the Biden administration and Republican leaders in the House on the US borrowing limit, stating that it “relieves a big piece of uncertainty about the economy.” The agreement will be up for debate in the House, with the vote expected to take place on May 31, before being sent to the Senate for approval. However, the bill needs to be passed before the deadline of June 5, the day when the Treasury Department has warned that the federal government could run out of money to pay off its debts—for the first time in its history.

Mester Remains Disappointed Over Inflation Rate Results

Mester, who is a policy hawk on inflation, told the Financial Times that she was disappointed at the progress in containing inflation. She believes that the Fed should only pause rate hikes when the risks of doing too little were evenly balanced with doing too much. She is open to being swayed by the next employment report on June 2 and the latest inflation results, which are expected to be released before the next Fed policy meeting on June 13–14.

Debate Over a Rate Hike in June Divides Policymakers

The debate over whether to raise interest rates in June continues to divide policymakers. While some believe that another rate hike is necessary to control inflation, others argue that the central bank does not need to tighten the money supply any further. Mester believes that another small step is necessary to counter the stubborn inflationary pressure.

• Mester urges for another interest-rate hike to control inflation
• Debt-limit agreement relieves uncertainty on US economy
• Mester remains disappointed over inflation rate results
• Debate over a rate hike in June divides policymakers