Inflation will hover above 2 per cent at least for 2 years, Fed’s Mester says

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Inflation will hover above 2 per cent at least for 2 years, Fed’s Mester says

In what could signal an ultra-hawkish US Fed stance at least until end-2022, Cleveland Fed President Loretta Mester was quoted saying that it could take at least two years for inflation to ease in the United States. In the matter of the fact, latest remarks from Lorretta Mester came forth as a lingering inflation-surge had made all Fed policymakers hawkish.

Aside from that, US Federal Reserve had raised its benchmark borrowing cost by 75 bps (basis percentage point) to 1.50 per cent on June 15-16 policy meet, while the US Fed policymakers also had forecasted that they wanted the Central Bank’s key borrowing cost to hover around 3.5 per cent by end-2022.

Latest ultra-hawkish policy stance from the US Fed came against the backdrop of a 40-year peak rise in inflation indicators, while US Consumer Price Index (CPI) jumped to an 8.6 per cent over past twelve months through May on a year-on-year basis.

Fed’s Mester said inflation to stay above 2% for 2 years

Meanwhile, Mester said in an interview with CBS News on Sunday, “It isn't going to be immediate that we see 2% inflation.

It will take a couple of years, but it will be moving down. We do have growth slowing to a little bit below trend growth and we do have the unemployment rate moving up a little bit. And that is OK, we want to see some slowing in demand to get it in line with supply”.

Nonetheless, US Dollar Index (DXY) measured against a six major currencies on an average fell as much as 0.39 per cent to 104.020, as recession frets sparked following remarks from Fed’s Mester.