CLEVELAND — Every two years the Federal Reserve Bank of Cleveland brings together policy makers and practitioners to discuss the issues facing low and moderate income families along with their communities. It's a two-way conversation Robbie Suggs of Cincinnati appreciates.
"I'm glad that they have the foresight to know that working with people who are actually in the trenches doing the work is very valuable for them to hear," said Suggs.
Cleveland Fed President and CEO Loretta Mester says it's a part of their job definition.
"We really do have a mandate to make the economy strong and we want the economy to be strong for everyone," Mester said. "Our dual mandate in terms of monetary policy is maximum employment and then price stability, and you can't be a strong economy unless you have everyone at the table, and so we try to do these conferences to really understand the issues that are affecting low and moderate-income neighborhoods, communities and people."
"I think what we heard was that there's still a lot of struggle for people in terms of they might have a job, and they might have multiple jobs because people are doing more kind of not working for traditional employers, but we're also hearing that they're feeling very constrained because of the high cost of living, things that they need to buy. Transportation's very vital to get to a job right? Food, we heard about food poverty, people can't get good food, it's too costly. We heard about childcare being an issue. So there are still impediments even in a strong economy where the labor markets haven't been this strong in 50 years."
The Fed is now in the middle of a balancing act as they raise interest rates in an effort to bring down inflation, but do it in a way that doesn't push the economy into a recession. Prior to the Fed's June meeting, Mester said there was no compelling reason for Fed to wait before raising rates another .25%. Still, the decision was made to not do it. So does she believe this will mean the rate will definitely go up when they meet in late July?
"Well, I think if you read the summary of economic projections, which basically summarizes where all of the participants on the FOMC (Federal Open Market Committee) are, the median of that group really thinks that we're going to need to raise interest rates more and that's where I am. I do think we're going to have to bring the interest rate up because it is really imperative that we get inflation back under control and moving down to our 2% goal. What we heard in the last session was that these high costs are really affecting people, and they're also affecting businesses."
Last week the Fed released updated forecasts that show 12 of 18 policymakers expect two more 25 basis point rate hikes this year. That would put the Fed rate on the doorstep of 6%, which, since the 1970s, has been the tipping line into recession.
"We don't want to go too far, we don't want to bring interest rates up to a level that really isn't needed to get inflation back, but we can't undershoot it either because allowing inflation to stay at these high levels is detrimental to the economy as well. And so we're balancing that out," Mester said. "The 50 basis point was what the summary of economic projections had as the median path, but we're going to taking each meeting as we go, looking at all of the information that's come in on where the economy is and being very diligent in getting inflation back down but also being very careful to that balancing between not trying to go too far and not trying to go too little."
As she looks down the road, she said the district of the Cleveland Fed that is made up of all of Ohio and parts of Kentucky and Pennsylvania is "sort of a microcosm of the nation. Right? We have a lot of services here, Eds and Meds are very important in our district, but we also have manufacturing, the auto industry is still represented here," she said. "And so we have a lot of things going on in our district that really gives me very good insights into what's happening in the rest of the nation.
"We're facing the same challenges, but there's positives here too. We know that we have an Ohio economy that has a lot of job prospects in terms of more technology jobs coming here. And you know, I guess I'm an optimist that we're going to get through this period of high inflation, get back to price stability and then we'll be poised for an economy that everyone can benefit from."
