Fed's Mester casts doubt on the need for 'shock' interest rate hikes ahead
Cleveland Federal Reserve President Loretta Mester said Friday she's in favor of raising interest rates quickly to bring down inflation, but not so quickly as to disrupt the economic recovery.
That means a strong likelihood of backing a 50 basis point rate hike at the next Fed meeting and perhaps a few more after, but not going to 75 basis points, as St. Louis Fed President James Bullard suggested earlier this week. A basis point is 0.01 percentage points.
«My own view is we don't need to go there at this point,» Mester said on CNBC's "Closing Bell" when asked by host Sara Eisen about the 75-basis-point move. «I'd rather be more deliberative and more intentional about what we're planning to do.»
Mester said she would like to see the Fed get its benchmark overnight borrowing rate to 2.5% by the end of this year, a rate that she and many Fed officials see as being «neutral,» or neither stimulating nor repressing growth.
The fed funds rate sets what banks charge each other for overnight borrowing, while also serving as a benchmark for many forms of consumer debt. It currently is set in a range between 0.25%-0.5%, following a quarter-percentage point increase in March.
«I would support at this point where the economy is a 50 basis point rise and maybe a few more to get to that 2.5% level by the end of the year,» Mester said. «I think that's a better path.… I kind of favor this methodical approach, rather than a shock of a 75 basis point [increase]. I don't think it's needed for what we're trying to do with our policy.»
Her comments mesh with what Chair Jerome Powell said Thursday.
Though the statements from both officials also were in line with recent Fed communications, they coincided with a fresh round of selling on Wall
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