From CNBC: 2024-04-02 12:05:31

President and CEO of the Federal Reserve Bank of Cleveland, Loretta Mester, appears on “The Exchange” on March 7, 2024. She expects interest rate cuts this year, ruling out the May policy meeting. Mester believes the long-run path is higher than previously thought, dependent on continued economic growth and progress on inflation.

During a speech in Cleveland, Mester stated that she sees inflation continuing to trend towards 2 percent over time. She emphasized the need for more data to raise her confidence and determine whether inflation progress is stalling out. Mester does not anticipate having sufficient information for the next FOMC meeting in May to make a final decision.

Following the recent FOMC meeting, Mester’s comments suggest that a rate cut is unlikely at the April 30-May 1 meeting. Market pricing also reflects this sentiment. Mester is a voting member of the FOMC but will reach the 10-year limit in June.

Despite the expectation of rate cuts, Mester believes the long-run federal funds rate will be higher than previously expected, around 3%. This rate is seen as neutral, neither stimulative nor restrictive, with other members leaning towards a higher rate. Mester stressed the importance of calibrating policy to avoid aggressive actions in response to economic developments.

Read more: Fed’s Mester still expects rate cuts this year, but rules out May