In a recent interview with CNN International, Loretta Mester, the President of the Federal Reserve Bank of Cleveland, reaffirmed her confidence in the robustness of the labor market while emphasizing that future interest rate decisions would hinge on data-driven analyses. Despite acknowledging persistently high inflation rates, Mester pointed to signs of a deceleration in wage growth and a cooling labor market as potential indicators of easing inflationary pressures.
Mester discussed the possibility of maintaining the current elevated benchmark rate, hinting at the likelihood of a rate hike decision to be considered at the Federal Reserve’s forthcoming November meeting. Last month, the benchmark rate reached a 22-year peak, fluctuating between 5.25% and 5.5%, with the consensus among most policymakers leaning towards another rate increase by year-end.
The US labor market experienced a remarkable surge in September, adding 336,000 jobs, a performance that exceeded economists’ earlier predictions. Nevertheless, average hourly earnings recorded a modest increase of just 0.2% for the month, resulting in a 4.2% annual increase, the smallest seen since mid-2021. Nonsupervisory employee earnings also saw the most subdued consecutive monthly growth since 2020.
Mester expressed optimism about the Federal Reserve’s ability to reach its 2% inflation target by the end of 2025. However, she was quick to clarify that she lacks voting rights in policy decisions this year. She also noted that officials are anticipating fewer rate cuts in 2024 than previously anticipated. Should economic conditions align with those observed during the September meeting, Mester voiced her support for another interest-rate increase at the upcoming gathering.
