(Reuters) -Cleveland Federal Reserve Bank President Loretta Mester on Tuesday said raising interest rates in half-point increments “makes perfect sense” for the next couple of Fed meetings, and that ultimately rates will need to rise above 2.5% to rein in too-high inflation.
“It may very well be that the unemployment rate will have to move up a little bit, we may get another quarter of negative or slow growth, but that’s going to have to happen if we want to get inflation down,” Mester told Yahoo Finance. “I think things will be bumpy.”
At the same time, she said, she does not believe the Fed’s rate hikes — aimed at slowing demand for labor and products that is outrunning constrained supply — will push the economy into a sustained downturn.
“I don’t really see it as a tradeoff really, because I really fundamentally believe that if we don’t get back to price stability, we’re not going to have sustainably healthy labor markets in the future,” she said.
(Reporting by Ann Saphir; Editing by Andrea Ricci)
