Ex-regional Fed president: Inflation headed lower, with interest rates likely to follow
Loretta Mester, having worked in the Federal Reserve system her entire career, rose to become president of the Cleveland Fed for a decade until her retirement on June 30
WASHINGTON — Having worked in the Federal Reserve system her entire career, Loretta Mester rose to become president of the Cleveland Fed for a decade until her retirement on June 30.
During most of her years on the Fed's interest-rate-setting committee, Mester was likely to favor relatively higher interest rates to contain inflation. This stance earned her the label of “hawk,” which describes officials who typically worry most about controlling inflation. («Doves,» by contrast, tend to focus more on keeping rates low to maximize employment.)
Yet in a recent interview Mester reiterated that should inflation keep cooling, as she and other Fed officials expect, the central bank should cut rates this year.
Mester, 65, who earned a Ph.D. in economics at Princeton, joined the Fed's Philadelphia branch in 1985 and became its research director in 2000. She discussed where she thinks inflation is headed, how the Fed has changed during her tenure and why many Americans are still glum about the economy. The interview has been edited for length and clarity.
A. It really looks like inflation has resumed its downward path. And that’s very good. That’s kind of what we’re looking for. We want inflation to get down in a sustainable way to our 2% goal.
And at the same time, we’re seeing moderation in demand, but we’re also seeing that labor markets remain healthy. But for me to be feeling that we could start cutting rates, it would be good to get a few more good inflation readings.
I’m expecting the economy to evolve in a way that later this year, the Fed will be able
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