Fed’s Mester: We are not in a recession now but recession rates have increased

Cleveland Fed Pres. Loretta Mester speaking and says:

• We’re are not in recession right now
• Recession risks have gone up though
• There is still path to soft landing
• We have to take supply constraints as a given as they are likely to remain for some time
• I don’t use yield curve as a strong indicator of where the economy is going
• Given size of balance sheet, we should discuss selling some MBS
• policy is working on the demand-side
• but that moderating demand is not yet impact inflation
• needs to see several months of inflation coming down
• Firms still struggling to find workers

The comments are similar to ones made on Tuesday. Below are some of the things Mester said during a Washington Post interview:

• she does not believe we are in a recession
• US labor market is very healthy right now
• We have not seen inflation cool at all
• Growth will be below trend this year
• The Fed is committed to bring inflation under control
• we are starting to see slow down in investment, consumer spending and housing
• Wants to see inflation to move down on a sustainable basis
• we need to make sure inflation expectations don’t become entrenched
• haven’t seen anything that suggests inflation even leveling off yet
• I think will see some increase in unemployment as we go through the cycle but we need that to happen to make sure we get back to price stability
• we have a narrow path to not sparking a large rising layoffs

The US stocks are trading mixed with the Dow down, the S&P near unchanged and the NASDAQ modestly higher.

In the US debt market, yields are lower in the short and then modestly higher in the long end:

• 2 year 3.055%, -1.4 basis points
• 5 year 2.792%, -3.6 basis points
• 10 year 2.688%, -1.8 basis points
• 30 year 2.978% +3.0 basis points

/inflation