Former Cleveland Fed Pres. Mester: No convincing evidence inflation is on downward path back to 2%

• Fed is expected to raise rates by 25 basis points, and Mester believes they should.
• Reasons for rate hike: strong demand, robust investment (including AI), resilient consumer, and an imbalanced labor market with constrained supply.
• Inflation remains high and shows no convincing evidence of a sustained downward trend towards the 2% target.
• Mester suggests a 25 basis point hike now, with readiness for more if inflation doesn't decline, to prevent it from feeding into broader price and wage-setting behavior.

Loretta Mester, former Cleveland Fed President, discusses the upcoming Fed meeting, stating that the Fed will and should raise rates by 25 basis points. She argues that strong demand, a tight labor market, and persistent inflation (not yet on a clear downward path to 2%) necessitate further tightening. She emphasizes the need to prevent inflation from becoming embedded in the economy.