Mester: Sees Rates A Little Above 4% Next Year

• Speaking to reporters after earlier remarks, Mester (’22 voter) says she sees a 75bp hike in Sept as “not unreasonable” but it could also be 50bp, whilst seeing rates peaking a little above 4% next year.
• After hawkish remarks on Tuesday including haven’t not seen signs of inflation peaking, this is the first explicit rate path guidance since the Jul FOMC, adding to other FOMC members of late pushing back against market pricing of both the terminal rate and priced cuts thereafter.
• The initial reaction is limited to Sep FOMC pricing (still 61bps) but helps drive increases further out the curve. Ultimately though, the market implied peak in the Fed Funds rates at 3.45% in Feb’23 (cumulative 112bp hikes) before cutting to 2.91% in Dec'23 remains far below talk of rates in the high 3s/low 4s.

Further headlines from Bloomberg:

MESTER: FORWARD GUIDANCE IN NEW FRAMEWORK WAS A BIT TOO STRICT

MESTER: HER RATE PATH COULD BE MORE FRONTLOADED, DATA DEPENDENT