Cleveland Fed Chair Loretta Mester said she cannot rule out raising interest rates again next month after disappointing progress in inflation.
"Everything is on the Table, Inflation Still Very High and Stubborn"
Mester, who will not vote on interest rate decisions this year, said in an interview with CNBC on Friday:
"Everything is on the table in June. Inflation is still very high and stubborn."
Data released today showed that the personal consumption expenditures price index (PCE), the inflation indicator that the Fed prioritizes, increased by 0.4% faster than expected in April and rose 4.4% compared to a year ago, more than double the FED's 2% target. .
"Data this morning shows we still have a lot of work to do," Mester said.
Mester said the Fed has come a long way from a very loose stance to a restrictive stance, but it still has more work to do. Mester said he supports a FED interest rate above 5% and that the Fed may have to revise its inflation forecast upwards for its forecasts.
Mester said everything is on the table for the June meeting of the Federal Open Market Committee (FOMC), which sets the Fed's monetary policy. He said he would not prejudge the outcome of the meeting and that the Fed should look at all incoming data.
Mester said he doesn't know exactly how tight monetary policy is at the moment, and it's important that the Fed doesn't tighten its monetary policy any less than necessary. Mester said that the moment is the hard part for monetary policy decisions and today's data shows that the FED has more work to do.
Mester also said he hasn't seen much sign that the stress in the banking industry is affecting credit conditions, and that the focus is now on tightening credit standards. He said the economy has slowed considerably compared to last year, but has been resilient. He said it has not yet reached a point where the next move could be up or down.
*Not investment advice.