Inflation Will Not Fall to 2 Percent Target for 2 Years, Cleveland Fed President Says

Inflation Will Not Fall to 2 Percent Target for 2 Years, Cleveland Fed President Says
Cleveland Fed President Loretta Mester takes part in a panel convened to speak about the health of the U.S. economy, in New York on Nov. 18, 2015. (Lucas Jackson/Reuters)

WASHINGTON—Cleveland Federal Reserve Bank President Loretta Mester said it will take two years for inflation to fall to the central bank's 2 percent target, adding that it will be "moving down" gradually from the current level.

A surge in inflation, which is at its highest level in 40 years, has made hawks of nearly all Fed policymakers, only one of whom dissented earlier this week against what was the central bank's biggest rate increase in more than a quarter of a century.

"It isn't going to be immediate that we see 2 percent inflation. It will take a couple of years, but it will be moving down," Mester said in an interview with CBS News on Sunday.

Mester said she was not predicting a recession despite slowing growth.

"We do have growth slowing to a little bit below trend growth and we do have the unemployment rate moving up a little bit. And that is OK, we want to see some slowing in demand to get it in line with supply," Mester added, referring to forecasts submitted in the past week by participants of the Federal Open Market Committee's meeting.

Policymakers currently expect to raise the Fed's benchmark overnight interest rate, now in a range of 1.50 percent to 1.75 percent, to at least 3.4 percent in the next six months. A year ago, the majority thought the rate would need to stay near zero until 2023.

On Friday, the Fed called its fight against inflation "unconditional."

By Kanishka Singh