Mester 'reasonably confident' in inflation
The full text of Mester's speech includes this line:
"I expect inflation to remain low in the near term, but the firming in the core measures, the stability in inflation expectations, the economy's expected return to above-trend growth, and continued improvement in labor markets are all factors making me reasonably confident that inflation will gradually return to our 2 percent goal over the medium run."
The words reasonably confident aren't a coincidence. This is the key line in the FOMC statement.
"The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."
There is little doubt on the jobs front any longer so it's all about inflation and if Mester is already reasonably confident, then she's decided to vote for a hike.
On top of that, Mester said the time to demonstrate a way out of emergency mon pol "is quickly approaching."
She leans toward the hawkish side so none of it is a big surprise. Mester doesn't have a vote this year but she will in 2016, along with Bullard and George, who are also hawks.
- October jobs report was 'very robust'
- November report unlikely to be as strong
- Breakevens have moved down a bit, but analysis suggests that this likely reflects liquidity effects and changes in inflation risk premiums more so than changes in inflation expectations
- Reasonably confident that inflation will gradually return to our 2 percent goal over the medium run
Overall, this speech is quite a bit more hawkish than the headlines on the newswires.
