Mester Continues Pushback Against Pivot Idea

Comments from Cleveland Fed President Mester (’22 voter, hawk) underlined her focus on the fight against inflation, as she stressed a singular focus on the matter, expressed her preference for a rate path that is above the median dot in the SEP owing to a greater worry re: inflation than most of her colleagues and stressed that she doesn’t foresee rate cuts in ’23, in a continued pushback against the pivot narrative.

• The higher for longer mantra got further airtime, as Mester pointed to the need for positive real rates “for a while.”
• On balance sheet maters Mester suggested that the outlined runoff of the Fed’s balance sheet equates to ~50bp of tightening over time, while noting that selling some MBS eventually would be a good thing.
• She also seemed to play down worries re: U.S. financial market functionality.