A Federal Reserve Bank of Cleveland official has called for an interest rate hike above 5% this year to address inflation concerns. Federal Reserve Bank President Loretta Mester believes that pushing the benchmark rate above the current target range of 4.75% to 5% and holding it there for a while is necessary to stamp out inflation.
The US Federal Reserve has been maintaining a hawkish stance, with policymakers increasing interest rates monthly despite being in the midst of a banking crisis. In their most recent move, the Fed raised the rate by 25 basis points last month, bringing the policy benchmark to 4.75% to 5%.
The inflation rate has been a major concern for the Fed, with Mester predicting that improvements will soon be seen on the inflation front. In recent months, inflation in the US has been gradually declining, with the Consumer Price Index (CPI) falling to 7.1% in November last year, 6.5% in December, 6.4% in January, and 6% in February of this year.
While the Fed’s hawkish stance may raise concerns among investors and borrowers, Mester’s expectation of significant refinement on inflation could provide some relief to those worried about the potential impact of the Fed’s decision. As the Fed closely monitors inflation and adjusts interest rates accordingly, it remains to be seen how this will impact the US economy in the coming months.
