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By
making home, auto and other loans more expensive, Fed interest
rate increases and other actions "will help reduce excess
demand, which is outpacing constrained supply, and bring price
pressures down," to the Fed's 2% inflation target, Mester said.
"I think it will take some time. ... Inflation will remain above
2% this year and even next year. But the trajectory will be
moving down."
The Fed is planning a steady series of interest rate increases
this year and expects also to trim its holdings of Treasury
bonds and mortgage-backed securities as a second method for
lifting the cost of credit to businesses and households.
Mester, who has said she favors a more aggressive pace of rate
increases than some of her colleagues, said she was "optimistic"
the current economic expansion and strong job market would
continue despite tighter monetary policy.
"I think we can reduce excess demand relative to supply without
pushing the economy into recession," Mester said. "It is very
important that we get inflation under control. That is the
biggest challenge right now."
Annual inflation by the Fed's preferred measure is currently
6.4%, a level Mester acknowledge was a "real painful problem"
for many families. An unemployment rate of 3.6%, low by
historical standards, is producing large wage gains for many
workers but for many prices are still rising faster.
President Joe Biden on Twitter Sunday threw the focus on the job
market, considered by some economists as among the strongest
since World War II.
"Americans are getting back to work at a historic pace. Over the
last four weeks, fewer Americans filed initial claims for
unemployment insurance than at any time in our nation’s recorded
history," Biden said.
(Reporting by Howard Schneider; Additional reporting by Brendan
O'Brien; Editing by Daniel Wallis and Mark Porter)
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