Fed's Mester says inflation hasn't peaked and multiple half-point rate hikes are needed

cnbc.com:

Cleveland Federal Reserve President Loretta Mester said Friday that she doesn't see ample evidence that inflation has peaked and thus is on board with a series of aggressive interest rate increases ahead.

«I think the Fed has shown that we're in the process of recalibrating our policy to get inflation back down to our 2% goal. That's the job before us,» Mester said in a live interview on CNBC's "The Exchange."

«I don't want to declare victory on inflation before I see really compelling evidence that our actions are beginning to do the work in bringing down demand in better balance with aggregate supply,» she added.

Mester spoke the same day the Bureau of Labor Statistics reported that nonfarm payrolls rose by 390,000 in May, and, importantly, that average hourly earnings had increased 0.3% from a month ago, a bit lower than the Dow Jones estimate.

While other recent data points have shown that at least the rate of inflation increases has diminished, Mester said she will need to see multiple months in that trend before she'll feel comfortable.

«It's too soon to say that that's going to change our outlook or my outlook on policy,» she said. «The No. 1 problem in the economy remains very, very high inflation, well above acceptable levels, and that's got to be our focus going forward.»

Recent statements from the rate-setting Federal Open Market Committee indicate that 50 basis point — or half-point — rate increases are likely at the June and July meetings. Officials are likely then to evaluate the progress that the policy tightening and other factors have had on the inflation picture.

But Mester said any type of pause in rate hikes is unlikely, though the magnitude of the increases could be reduced.

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