Federal Reserve Bank of Cleveland President Loretta Mester said the risk of a recession in the US economy is increasing, and that it will take several years to return to the central bank’s 2% inflation goal.
A surge in inflation, which is at its highest level in 40 years, has made hawks of nearly all Fed policymakers, only one of whom dissented earlier this week against what was the central bank’s biggest rate increase in more than a quarter of a century.
“It isn’t going to be immediate that we see 2% inflation. It will take a couple of years, but it will be moving down,” Mester said in an interview with CBS News on Sunday.
Mester said she was not predicting a recession despite slowing growth.
“We do have growth slowing to a little bit below trend growth and we do have the unemployment rate moving up a little bit. And that is OK, we want to see some slowing in demand to get it in line with supply,” Mester added, referring to forecasts submitted in the past week by participants of the Federal Open Market Committee’s meeting.
Policymakers currently expect to raise the Fed’s benchmark overnight interest rate, now in a range of 1.50%-1.75%, to at least 3.4% in the next six months. A year ago, the majority thought the rate would need to stay near zero until 2023.
On Friday, the Fed called its fight against inflation “unconditional.”
Reporting by Kanishka Singh in Washington; Editing by Lisa Shumaker
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