By Michael S. Derby
(Reuters) - Cleveland Federal Reserve bank President Loretta Mester said on Friday that she believes the U.S. central bank will have to raise interest rates higher than the level most policy makers cited in their Fed forecasts this week.
Against the Fed’s projection that the current federal funds rate of between 4.25% and 4.5% will rise to 5.1% next year, Mester said, “I’m a little higher than the median.” She spoke on Bloomberg’s television channel.
"We need to continue to bring up interest rates into a restrictive stance," Mester said. "We did a lot of work this year" moving rates up aggressively, she said, adding once the Fed finishes raising rates, it will need to hold them there for "quite a while in order to get inflation on a sustainable downward path."
Mester has been a voting member of the rate setting Federal Open Market Committee this year but will not hold that role next year. On Wednesday, the FOMC raised its target rate by half a percentage point as it continues to work toward lowering the highest levels of inflation seen in decades.
Mester said recent inflation data pointing to moderating price increases is "good news." But she added the data does not yet show that a peak in price pressures has occurred.