Cleveland Federal Reserve President Loretta Mester said on Thursday the U.S. central bank still has more interest rate increases ahead of it, while noting the aggressive move to boost the cost of borrowing over the last year to quash high inflation is nearing its end.
"Demand is still outpacing supply in both product and labor markets and inflation remains too high," Mester said in a speech to the Akron Roundtable, a community forum in Akron, Ohio.
But she also noted that supply imbalances in the economy are on the mend, and with the cumulative impact of Fed rate rises weighing on the economy, "we are much closer to the end of the tightening journey than the beginning." Mester added what happens next with rates will depend on the economy. The Cleveland Fed chief said banking problems that kicked off last month could help add to a tightening in financial conditions that could affect the choices central bankers will make.
Mester said she expects the unemployment rate, which is currently 3.5%, to rise to between 4.5% and 4.75%. She sees inflation, which was running at a 5% clip on a year-over-year basis in February based on the Fed's preferred measurement, easing to 3.75% this year and hitting the central bank's 2% target in 2025.
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