PARIS (Reuters) – Loretta Mester, chairwoman of the Cleveland Federal Reserve, said on Wednesday it was necessary for the U.S. central bank to raise its main key rate to just above 4% by early 2023 and hold it there. until it succeeded in bringing inflation back towards the 2% target.
“My view right now is that it will be necessary to raise the fed funds rate to just over 4% by next year and keep it there. federal funds rate target next year,” Loretta Mester said in a speech to the Dayton, Ohio Chamber of Commerce.
The fed funds rate range is currently pegged at 2.25% to 2.5% and according to Refinitiv data, traders estimate a 70% chance of a 75 bp rate hike. basis next month.
Loretta Mester also indicated that her decision whether or not to support a further three-quarter point rate hike in September would be based on the inflation outlook more than on the monthly employment report published next Friday.
The Cleveland Fed chair added that the Fed should be careful not to “take wish for reality” and that it was far too early to conclude that inflation had peaked.
Bringing inflation back towards the Fed’s 2% target will take “a lot of courage”, she insisted.
(Report Lindsay Dunsmuir; French version Laetitia Volga, edited by Tangi Salaün)
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