Federal Reserve's Harker: May Need Multiple Rate Hikes to Tackle Inflation

August 11th—Cleveland Fed President Mester stated that current inflation has not yet returned to the target level, and the Fed may need to raise interest rates multiple times. She said a 25-basis-point rate hike "would not have a significant impact on the economy," but she was unwilling to predict the specific number of rate hikes or the final target rate. Mester believes that the current rate range of 3.50%-3.75% has not substantially constrained the economy, as businesses have not reduced investment growth due to higher rates, therefore "now is the time to act." She expressed that the longer the Fed waits, the harder it will be for inflation to return to 2%.

Mester also emphasized that the labor market currently does not show any significant issues, and the July employment data will not change her focus on inflation. She believes that the market can only support the Fed and cannot replace the Fed in taking action. Mester dissented at the Fed's July policy meeting against keeping rates unchanged, expressing a preference for a 25-basis-point rate hike. (FXStreet)