Alternate Member Mester Can’t See Reason To Pause Yet

Cleveland Fed President Mester has given an interview with the FT where she sounded quite hawkish saying that she sees no “compelling reason” to pause rate hikes just to gather more information if the data are pointing to a need for further tightening to contain inflation. She believes that “everything” remains on the table for the June 14 meeting. She is currently not a FOMC member but will join the committee in 2024.

• Mester believes it is a better strategy to hike now and then hold for “a while until you get less uncertain”. She said that the debt-ceiling deal had relieved some uncertainty.
• Markets have a 58% chance of a 25bp hike priced in for June. Some FOMC members have suggested that there could be a pause. Mester believes that the central bank should only pause when the risks of doing “too little” are evenly balanced with doing “too much”. She thinks the May payroll (June 2) and inflation (June 13) data will be key to the June decision.
• She has been disappointed with the slow progress in bringing inflation down and she thinks that “we may have to go further”, signalling that she doesn’t believe it’s time to pause yet. Policy decisions are only going to get harder from here.