Cleveland Fed Pres: 2023 Will Have Inflation above Target Rate, ‘Very Low Growth Environment’ with Recession Risk

On Monday’s broadcast of CNBC’s “Closing Bell,” President and Chief Executive Officer of the Federal Reserve Bank of Cleveland Loretta Mester predicted that while there will be substantial progress on inflation in 2023, “We won’t be back to 2%,” and “growth is going to be well below trend, and when you’re in that kind of very low growth environment, there is a risk that a shock could send you into negative growth for a few quarters.”

Mester said, “So, right now, my forecast is that we’re going to see some real good progress on inflation next year. We won’t be back to 2%, but we’ll see some meaningful progress next year. But if we don’t see that, then we’re going to have to make sure our policy really reacts to the incoming information. So, I can’t tell you today what the path going forward will be necessarily. I can tell you what I expect it to be, given what my forecast is.”

She added, “I don’t disagree that the journey itself is not going to be — it’s going to have some pain involved. We’re going to try — our aim is to do this as painlessly as possible.”

Mester concluded that she doesn’t have a recession in her forecast for next year, but “I do think, though, that growth is going to be well below trend, and when you’re in that kind of very low growth environment, there is a risk that a shock could send you into negative growth for a few quarters. So, again, I don’t have that built into my forecast, but I think we have to be attuned to the fact that there are risks out there, an unexpected shock could send us into negative growth.”

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