Cleveland Fed Pres: We ‘Haven’t Been Making Very Strong Progress on Inflation’ 

On Friday’s broadcast of CNBC’s “Squawk on the Street,” Cleveland Federal Reserve Bank President Loretta Mester stated that the latest Personal Consumption Expenditures (PCE) price index shows that progress on inflation “has been slow and in fits and starts” and “we just haven’t been making very strong progress on inflation” “and it’s concerning.” And that forward-looking data “also suggests that price pressures remain pretty darn high and pretty stubborn.”

Mester said, “I think it’s just confirming that inflation’s still too high and it’s stubborn and the progress — we have made some progress, inflation is down from where it was last summer, but the progress has been slow and in fits and starts. And I think the PCE inflation report just underscored that. Core inflation, core services ex-housing, which is one of the indicators we’ve been watching, both the monthly increases and the year-over-year increases have moved up, not down. Total PCE inflation also moved up. So, again, we have made progress, inflation is down from where it was last summer, but it’s very slow progress and it’s concerning.”

Later, she added, “[P]art of what we do also is talk to firms and businesspeople and people within the district who are making these pricing decisions and hiring decisions and wage decisions, as well as the people who are receiving wage decisions and how they’re thinking about whether to change jobs or not. And that’s forward-looking evidence. And that also suggests that price pressures remain pretty darn high and pretty stubborn. And so, I don’t want to say that we’re not only looking at backward, we do look at forward. And you’re right, if you look at goods prices, they have been coming down. But we have to look overall, and the service prices have not come down as much. They’re the stubborn piece. We do think housing prices may come down, because leases — new leases are still coming down and that takes a while to feed through. But if you look at services ex-housing in the core services ex-housing, that’s been stubborn and it remains stubborn. And the news this morning is that we just haven’t been making very strong progress on inflation. We’ve kind of — the monthly readings have been sort of stable around these levels. And we just have to get back to 2%. So, I don’t disagree that we’ve done a lot and we’re going to see that affecting the economy going forward, but we have to balance that with the fact that progress isn’t — hasn’t been as fast and that’s concerning as well.”

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