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MNI INTERVIEW: Fed's Mester: Rates Likely Headed Above Neutral

(MNI) Washington

A 2.5% fed funds rate could still be accommodative, Cleveland Fed President Loretta Mester tells MNI.

The Federal Reserve likely needs to move monetary policy to a restrictive stance to contain inflation, Cleveland Fed President Loretta Mester told MNI Monday, warning that the Fed's estimate of the nominal longer run fed funds rate of 2% to 3% might still leave policy too accommodative.

"With inflation as high as it is, and with expectations for inflation above 2%, you need to take into account that -- at least on the short end -- we’re still at an accommodative stance of policy. And even if we get up to 2.5%, depending on what’s happening on the inflation and expected inflation, we may still be accommodative," she said in an interview.

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The Federal Reserve likely needs to move monetary policy to a restrictive stance to contain inflation, Cleveland Fed President Loretta Mester told MNI Monday, warning that the Fed's estimate of the nominal longer run fed funds rate of 2% to 3% might still leave policy too accommodative.

"With inflation as high as it is, and with expectations for inflation above 2%, you need to take into account that -- at least on the short end -- we’re still at an accommodative stance of policy. And even if we get up to 2.5%, depending on what’s happening on the inflation and expected inflation, we may still be accommodative," she said in an interview.

Keep reading...Show less