Fed's Loretta Mester Says 'We Only Get A Trophy' If Inflation Hits 2%

FOMC member and Cleveland Fed President Loretta Mester echoed comments from Fed Chairman Jerome Powell that there is a long ways to go to improve inflation.

Here’s a look at what Mester had to say about the current state of the economy and what’s ahead.

What Happened: Mester, the President and CEO of the Federal Reserve Bank of Cleveland, provided an update to her earlier remarks to CNBC this summer, suggesting the need for two future rate hikes.

“We’re getting close to where we need to be,” Mester told CNBC Friday in a live interview in Jackson Hole, Wyoming.

Mester said the Fed has done one of the two hikes she earlier predicted. The Cleveland Fed President said we’ve come a long way, but inflation still remains too high.

Inflation needs to come down in a timely way, Mester added, saying that the Fed doesn’t want to be satisfied with recent results.

“We’ve had stronger underlying momentum in the economy. We’ve made a lot of progress on inflation.”

Mester noted that core inflation persists above 4%, a figure she described as excessively high.

“We probably have some more work to do.”

The comments from Mester came after Powell said earlier Friday that the Fed is ready to raise rates further if it's necessary. 

Related Link: Larry Summers Doles Out Advice To Fed's Powell Ahead of Jackson Hole 

What’s Next: Mester said it was important to balance policy and try to get down to a goal of 2% inflation, noting that the Fed doesn’t want to overtighten and doesn’t want to undershoot.

“We’re gonna look at all that data,” she stated.

Mester added that the Fed needs to see more evidence of sustained inflation and needs a couple more readings to understand if things are improving to the 2% goal. “We have to be a little bit patient now.”

Mester previously aimed to achieve 2% inflation by the end of 2024 and hopes to prevent any further delays.

The Cleveland Fed President said it’s very likely that growth needs to be below trend to get inflation in line, adding that demand needs to fall and match supply. “Does it have to be a recession? No.”

Mester told CNBC that the Fed's mission isn't complete, emphasizing that achieving 2% inflation is both the objective and the measure of their success. “This isn’t a game where everyone gets a trophy, we only get a trophy if we get inflation down to 2%.”

SPY Price Action: The SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500, is up 0.2% on the day at $437.75 versus a 52-week trading range of $348.12 to $459.44.
Major indexes fell after Powell’s comments earlier in the day before showing signs of recovery an hour later.

Read Next: Fed's Loretta Mester Sees No Compelling Reason To Pause Rate Hike: 'We May Have To Go Further' 

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