Fed's Mester, Bullard Make Hawkish Arguments On Fighting Inflation: 'I Was An Advocate For A 50-Basis-Point Hike'

Two Federal Reserve officials reportedly said on Thursday the central bank should have lifted interest rates more than it did in early February, and cautioned that additional hikes in borrowing costs are essential to bring down inflation to desired levels.

What Happened: Cleveland Fed President Loretta Mester stated in a virtual speech during a Global Interdependence Center conference that the central bank has made significant progress in bringing its policy from a very accommodative stance to a restrictive one, but said she believes there is more work to be done, according to a Reuters report.

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“The incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time,” Mester said.

She reiterated that the central bank's actions targeted at lowering inflation “will not be without some pain,” but also said she doesn’t expect a recession.

The comments come in the backdrop of economic data releases this month consistently indicating inflation isn't declining as much as expected, economy is running hotter and the labor market continues to remain strong.

The producers' price index for January rose 0.7% against an estimate of 0.4%, according to data released on Thursday.

Bullard's Comments: St. Louis Fed President James Bullard, in a separate conversation with reporters, indicated his stance that there was a good case for the central bank to have been more aggressive with its recent rates decision. “I was an advocate for a 50-basis-point hike and I argued that we should get to the level of rates the committee viewed as sufficiently restrictive as soon as we could,” Bullard said according to the report.

Bullard stated in his presentation to a business group in Tennessee that “inflation remains too high but has declined.”

“Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets,” he said.

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