MNI BRIEF: Fed's Mester: Rates Might Have To Go A Bit Higher

The Federal Reserve might need to lift interest rates "a bit higher" on the back of stronger-than-expected economic data and upside inflation risks, Cleveland Fed President Loretta Mester said in an interview with German newspaper Boersen-Zeitung published Tuesday.

"The latest indicators suggest that demand is somewhat stronger than expected, that the momentum in the economy is greater than thought," she said. "I can well imagine, from what I see so far, that we might have to go a bit higher, that we might have to raise the policy rate a bit more." (See: MNI INTERVIEW: US Manufacturing Set To Sustain Rebound - ISM)

Mester doesn't expect the FOMC to cut interest rates early next year. "We need to keep a sufficiently restrictive stance for quite some time to feel assured that inflation will come back down to 2%," she said. "There are upside risks to our inflation forecasts, in my view. So yes, inflation could go up again. So we have to make sure that our policy is sufficiently restrictive."