Cleveland Fed President: "Next Year US Inflation Rate Likely to Exceed 2%"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] Loretta Mester, President of the Cleveland Federal Reserve Bank, forecasted that inflation in the United States will remain above 2% next year.

According to major foreign media on the 10th (local time), President Mester appeared on CBS and said, "The Fed is working to curb the rise in prices, but inflation will remain at a high level for a considerable period." However, she added that the inflation trend is on a downward trajectory.

The U.S. consumer price index rose 7.9% year-on-year in February, marking the highest increase in 40 years since January 1982. The personal consumption expenditures (PCE), which the Fed uses as a benchmark, also rose 6.4% at that time.

President Mester diagnosed that the lockdown measures taken by the Chinese government to contain the spread of COVID-19 have worsened the current global supply chain issues and further contributed to inflationary pressures.

Nevertheless, she expressed optimism that despite the Fed's monetary tightening policies, the current expansion phase of the U.S. economy and the strong employment market will continue.

President Mester said, "I believe it is possible to reduce excess demand without pushing the economy into a recession," adding, "Controlling inflation is a very important issue and the biggest challenge at the moment."

She also stated, "Since wages in many households are not keeping up with rising prices, the Fed will need to devise policy measures to prevent inflation from becoming entrenched in the economy."