Cleveland Fed Pres. Mester: Monetary policies restrictive. Neutral rate may be higher

Cleveland Fed Pres. Mester is speaking on Bloomberg TV and says:

• Monetary policy is restrictive.
• Inflation progress stalled in first three months
• April CPI report was good news, but too soon to tell what path inflation is on
• Labor markets are becoming better balanced
• Rebalancing labor market will put downward pressure on inflation.
• We need to gather more evidence on inflation path to determine if it sustainably heading toward 2%
• In the first part of the year risks that fit is too restrictive and went down.
• Inflation risks are tilted to the upside.
• I don’t think about potential rate cut in terms of when.
• Rate cut depends on progress with inflation.
• Lack of progress on inflation was not welcome.
• No risk in spending more time gathering data on inflation because the economy is strong.
• Monetary policy is moderating demand, but not as fast as expected.
• Still think inflation will come down.
• But inflation won’t come down quickly.
• Policy is well-positioned for risks on either side.
• If there is unforeseen deterioration on real side of economy, can cut rates.
• Can hold rates or even raise them if inflation against expectations stalls out or reverses.
• We have to be careful in monitoring the economy.
• Neutral rate may be higher than thought before. I raised my estimate of it in March.
• Previously I expected three rate cuts this year, I do not think that still appropriate.

Mester will be retiring as the Cleveland Fed president in June. As result, her comments are more of an outsider rather than insider.

I don’t think any Fed officials are looking to do anything in June (right now), except to sit back Her comments are consistent with a Fed that is on hold, and Content in seeing more data given the strength of the economy and the risk of inflation perking up.

This article was written by Greg Michalowski at www.forexlive.com.