Fri, 02 Jun 2023

CLEVELAND, Ohio: It will take two years for U.S. inflation to fall to the central bank's 2 percent target, Cleveland Federal Reserve Bank President Loretta Mester has said, adding that inflation will be "moving down" gradually.

Surging inflation, the highest in 40 years, meant almost all Federal Bank policymakers agreed to the central bank's biggest rate increase in more than a quarter of a century, while only one member dissented.

"It is not going to be immediate that we see 2 percent inflation. It will take a couple of years, but it will be moving down," Mester said in an interview with CBS News this week.

But despite slowing growth, she was not expecting a recession, she added.

With regards to forecasts submitted in the past week by participants of the Federal Open Market Committee's meeting, Mester said, "We do have growth slowing to a little bit below trend growth and we do have the unemployment rate moving up a little bit. And that is ok, we want to see some slowing in demand to get it in line with supply."

The Fed's benchmark overnight interest rate, now in the range of 1.5 percent to 1.75 percent, to at least 3.4 percent in the next six months, is expected to be raised by policymakers.

Last year, most said the rate should stay near zero until 2023.

This week, the Fed called its fight against inflation "unconditional."

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