"I was very comfortable with moving ahead” with the rate rise, given that authorities had taken steps to manage risks coming from banking sector troubles, Mester said in remarks following her speech. At the policy meeting, officials also penciled in a single additional rate rise for this year, as the Fed continues to boost the cost of short-term borrowing in a bid to lower inflation.
In her remarks, Mester, who does not have a vote on the policy-setting Federal Open Market Committee this year, said, “My forecast is similar to the modal forecasts of FOMC participants released two weeks ago, although I see somewhat more persistent inflation pressures than the median forecast among participants.”
She also pushed back on market views that the Fed will need to cut rates much sooner than central bankers currently expect. "Can I come up with scenarios that would have the Fed cutting rates? Yes. Is it my modal forecast? No."
Mester expressed confidence that banking sector woes should ultimately prove contained.
“The U.S. banking system is sound and resilient,” she said. “The stresses experienced in the banking system in March have eased, but the Fed continues to carefully monitor conditions and is prepared to take further steps as necessary to ensure financial stability.”
In her remarks, Mester said she expects growth and hiring to slow and inflation pressures to ease.
There should be a “meaningful improvement” in inflation with price pressures easing from their current 5% year-over-year increase to 3.75% this year and 2% by 2025, Mester said.
She said growth should slow to below-trend levels this year
before ticking up next year. Unemployment, now at 3.6%, should
rise to between 4.5% and 4.75% by the close of 2023, she said.
(Reporting by Michael S. Derby; Editing by Lisa Shumaker and
Leslie Adler)
