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Interest Rates Must Rise, Cleveland Fed President Claims

Cleveland Fed President Loretta Mester stated on Thursday that she believes that interest rates need to be raised above 5% in order to deal with stubborn inflation. Mester added that the amount by which rates must be raised depends on economic developments going forward.

“I do think that given how stubborn inflation is and given the still strong labor market, I do think that rates are going to have to move up to above that 5% level,” Mester stated in an interview with Yahoo Finance LIVE. “But how much they have to move up and for how long they’ll have to remain there that’s what the economy is going to tell us.”

Mester revealed that the Federal Reserve seems to be closer to the end of its interest rate hikes than the beginning. She added that it remains to be seen whether interest rates will be raised at the Fed’s policy meeting in May or if officials will wait until the next meeting before raising rates.

Since the beginning of last year, the Federal Reserve has raised interest rates by a combined 4.75 percentage points. With the policy rate currently standing between 4.75% to 5%, officials expect another rate hike to be implemented before pausing in the region of 5% to 5.25%.

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