Loretta Mester, president of the Federal Reserve Bank of Cleveland, said Friday that the day's jobs report didn't change her view that the labor market remains strong, Whether the Fed will raise rates further will depend on more data to be released.
"Inflation is still too high, inflation continues to be high, but at least we are seeing progress," she said. Whether we need to tighten monetary policy further will really depend on all the data we get between now and the next meeting."
Despite the continued strength of the labor market, Mester said it is gradually cooling, with employers in her area telling her it is less difficult to recruit workers. She also pointed to Friday's jobs report, which showed wages falling, as further evidence of slowing inflation.
Mester also said the discussion among policymakers is shifting to how long the Fed should keep its benchmark rate high for now, with rates at or near their peak.
"I think it's likely we'll need to raise rates again this year, but I'll make that decision at our next meeting in November." "She said.
Fed officials last month left the target range for their benchmark interest rate unchanged at 5.25% to 5.5%, the highest level in 22 years. Forecasts released at the same time showed that 12 of 19 policymakers expect one more rate hike this year, and officials expect fewer cuts in 2024 than previously thought.
The US economy added 336,000 jobs in September, far more than economists had forecast before the Bureau of Labor Statistics released data on Friday. Average hourly earnings rose 0.2 percent last month and 4.2 percent year over year, the smallest annual gain since mid-2021. Non-managers, who make up the majority of workers, posted their smallest back-to-back monthly gains since 2020.
Mester said economic growth is "very strong" and reiterated that she wants the Fed to reach its 2 percent inflation target by the end of 2025.
Mester said earlier this week that if the economy performs about the same as it did at the September meeting, she would support another rate hike at the Fed's next policy meeting, adding that the decision would be based on incoming data.