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"Risks to inflation remain strongly on the upside, especially in
the midst of the continuing war in Ukraine and the potential
that the zero-COVID policy in China will further disrupt supply
chains. I will need to see several months of sustained downward
monthly readings of inflation before I conclude that inflation
has peaked," Mester said in remarks to a monetary policy forum.
With broad support for half-point rate increases at the Fed's
June and July meetings, Mester said this fall will be a pivotal
time to take stock of whether price increases are slowing from
their current 40-year high or not - adjusting the pace of rate
hikes accordingly.
"If by the September (Fed) meeting, the monthly readings on
inflation provide compelling evidence that inflation is moving
down, then the pace of rate increases could slow, but if
inflation has failed to moderate, then a faster pace of rate
increases may be necessary," Mester said.
"With some luck, supply chain disruptions will begin to abate
and labor market participation will continue to rise, helping to
ease supply constraints and allowing supply in product and labor
markets to come into better balance with demand. But we cannot
rely on luck."
(Reporting by Howard Schneider)
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