Loretta Mester, president of the Cleveland Federal Reserve bank © Reuters



The Fed’s management with Ms. Mester announced Thursday, February 24, that the U.S. central bank is on track to raise its key interest rates next month despite geopolitical tensions around Ukraine.


“Barring any unexpected developments in the economy, I think it will be appropriate to raise the policy rate in March, and continue with further increases in the months ahead,” Cleveland Fed President Loretta Mester said at a virtual event.

“The fallout from the current situation in Ukraine on the medium-term economic outlook in the United States will also be taken into account in determining the most appropriate pace for lifting (monetary) arrangements,” she said.

Observing that the imbalance between demand and supply in product and labour markets was contributing to very high inflation rates, Mester said she expects U.S. inflation to remain above 2 percent this year and next, with inflation risks “tilted to the upside.” “Geopolitical events add upside risk to inflation forecasts, even as they add downside risk to near-term growth forecasts,” she said.

Mester’s comments came after the U.S. Labor Department recently reported that the consumer price index in January rose 7.5 percent from a year earlier, the fastest annual pace in nearly 40 years.

The Fed signalled last month that the central bank was ready to begin a series of interest rate hikes in March to combat runaway inflation, following an extremely accommodative monetary policy adopted at the start of the COVID-19 pandemic.

 

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The Fed will raise its key rates in March 2022

Loretta Mester, president of the Cleveland Federal Reserve bank © Reuters



The Fed's management with Ms. Mester announced Thursday, February 24, that the U.S. central bank is on track to raise its key interest rates next month despite geopolitical tensions around Ukraine.


"Barring any unexpected developments in the economy, I think it will be appropriate to raise the policy rate in March, and continue with further increases in the months ahead," Cleveland Fed President Loretta Mester said at a virtual event.

"The fallout from the current situation in Ukraine on the medium-term economic outlook in the United States will also be taken into account in determining the most appropriate pace for lifting (monetary) arrangements," she said.

Observing that the imbalance between demand and supply in product and labour markets was contributing to very high inflation rates, Mester said she expects U.S. inflation to remain above 2 percent this year and next, with inflation risks "tilted to the upside." "Geopolitical events add upside risk to inflation forecasts, even as they add downside risk to near-term growth forecasts," she said.

Mester's comments came after the U.S. Labor Department recently reported that the consumer price index in January rose 7.5 percent from a year earlier, the fastest annual pace in nearly 40 years.

The Fed signalled last month that the central bank was ready to begin a series of interest rate hikes in March to combat runaway inflation, following an extremely accommodative monetary policy adopted at the start of the COVID-19 pandemic.

 

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