© Reuters
Investing.com – After the release of higher-than-expected PPI data, Loretta Meister spoke about the Fed and its next move against inflation.
Fed Meister said: “The extent to which the Fed will reach interest rates is mainly related to inflation, and at our last meeting there was no proposal to raise interest rates by 50 basis points instead of 25 basis points.”
Meister added, “There is a greater risk that we underestimate and control inflation, and what is clear is that current inflation levels are still very high.”
Meister confirmed that the CPI data for January guides us that there is still a lot of work required to bring down inflation towards the 2% target.
And she continued: “The Fed’s steps and policy will certainly lead to a decrease in the growth rate of the US economy and a strong increase in the unemployment rate. The journey to reaching price stability will be painful.”
Regarding the reversal of inflation and its rise again, Meister said that fear remains.
And about the existence of a movement more violent than the Fed in the upcoming meetings, Loretta said that this may happen if the data reveals a reverse movement of inflation. She said that the Fed could accelerate the pace of raising interest rates if the conditions are appropriate for that.
Meister said that interest should rise above the 0 level and stay there for an extended period of time, and the rate at which interest will rise above 5.00% depends on the data.
Meister stressed that the Fed does not intend to change its inflation target and drop it to about 2%, indicating that it will oppose any intention to do so, because reaching a healthy financial condition is very important for society in the long run.
Meister indicated that she does not believe that the US economy will enter a recession, although the retail sales data revealed some slowdown, but the US economy remains strong.
On employment data, Lauretta said that employment data is key when it comes to the growth and long-term health of the economy.
Regarding monetary policy and the extent it will take to reach its goal, Meister said that the Fed’s tightening policy may need a year to fully reflect on the state of the economy and achieve its goals.
On the debt ceiling crisis, Lauretta said that Congress must agree to raise the debt ceiling and help the United States pay off its debts.
