On Sunday, Loretta Mester, president of the Cleveland Fed and a vote taker for 2022, said the risk of a U.S. recession is increasing and that it will take “several years” for inflation to return to the Fed’s 2% target.
In an interview with the media, Mester said she was not predicting a recession, but that the risks were rising, in part because monetary policy could have shifted earlier.
‘It’s true that the U.S. economy is slowing, and it’s true that unemployment is rising a little bit,’ Mr. Meister said.This is acceptable and the US would like to see demand slow down to bring it in line with supply.
Ms Mester said that while monetary policy could target excess demand in the economy, it would take time to get the supply side “back into better balance”, saying: “We are not going to see 2 per cent inflation right away, it will take a few years, but it will come down.”
Last week, the Federal Reserve raised its main interest rate by three-quarters of a percentage point, the biggest increase since 1994.Expectations of a faster Rate hike by the Federal Reserve and a recession have risen since us CPI data unexpectedly continued to rise in May.
U.S. Treasury Secretary Janet Yellen also said on Sunday the U.S. economy would slow, but said a recession was not “inevitable.” In an interview, she said:
I expect the economy to slow down, as the labor market recovers and we’ve reached full employment, the economy has been growing at a very rapid rate……We expect the economy to shift to steady growth, but I don’t think a recession is inevitable.
Ms. Yellen reiterated that the conflict between Russia and Ukraine and supply chain disruptions caused by the pandemic were partly to blame for high inflation, and while those factors would not change immediately, she predicted that the pace of inflation was likely to decline in the coming months.