A Fed official warned on Tuesday of the risks for the American economy of prematurely starting to lower rates, in turn seeming to bury the possibility of the movement beginning at the next meeting in March.
It would be a mistake to cut rates too soon or too quickly without sufficient evidence that inflation is on a sustainable and timely path back to 2%, said Loretta Mester, president of the Cleveland branch of the US central bank.
According to her, this would compromise all the good work done to slow inflation to its current level.
If the economy develops as expected, I think we will regain that confidence later this year and then we can start lowering rates, said Loretta Mester, who has rotating voting rights on the policy committee this year. monetary policy of the Fed, the FOMC.
However, she also warned against a first cut too late, because maintaining the current level of rates for too long would in reality amount to a tightening of our policy, which would pose a growing risk for employment.
The Fed, after raising its rates to their highest level in more than 20 years to curb high inflation, now plans to begin lowering them in the coming months.
Its president, Jerome Powell, however, procrastinated on Wednesday, during his press conference organized after the meeting of the monetary policy committee.
He reiterated this position on Sunday evening during an interview on the CBS show 60 Minutes, once again considering it unlikely that a reduction would be decided at the next meeting in March.
Loretta Mester, during this Columbus (Ohio) speech, indicated that she anticipates that production and employment will moderate this year and that inflation will continue to approach our 2% objective over time, but emphasizes that this forecast carries a certain number of risks.
Heightened geopolitical tensions have potential implications for financial markets, oil prices and global demand and supply, while continued easing of financial conditions could boost activity, once again leading to imbalances that would fuel inflation, she explains.