Cleveland Fed President Loretta Mester believes that despite data suggesting it is beginning to ease, inflation will continue to increase and any declarations of victory are very premature.  Additionally, she is supporting the aggressive interest rate increases many are expecting.

CNBC/Jeff Cox
Fed’s Mester says inflation hasn’t peaked and multiple half-point rate hikes are needed

Cleveland Federal Reserve President Loretta Mester said Friday that she doesn’t see ample evidence that inflation has peaked and thus is on board with supporting a series of aggressive interest rate increases.

“I think the Fed has shown that we’re in the process of recalibrating our policy to get inflation back down to our 2% goal. That’s the job before us,” Mester said in a live interview on CNBC’s “The Exchange.”

“I don’t want to declare victory on inflation before I see really compelling evidence that our actions are beginning to do the work in bringing down demand in better balance with aggregate supply,” she added.

Mester spoke the same day the Bureau of Labor Statistics reported that nonfarm payrolls rose by 390,000 in May, and, importantly, that average hourly earnings had increased 0.3% from a month ago, a bit lower than the Dow Jones estimate.

While other recent data points have shown that at least the rate of inflation increases has diminished, the policymaker said she will need to see multiple months of that trend before she’ll feel comfortable.

“It’s too soon to say that that’s going to change our outlook or my outlook on policy,” Mester said. “The No. 1 problem in the economy remains very, very high inflation, well above acceptable levels, and that’s got to be our focus going forward.”

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CNBC/Hugh Son
A paradigm shift has begun in markets, says Morgan Stanley’s Ted Pick. Here’s what to expect

Global markets are in the beginning of a fundamental shift after a nearly 15-year period defined by low interest rates and cheap corporate debt, according to Morgan Stanley co-President Ted Pick.

The transition from the economic conditions that followed the 2008 financial crisis and whatever comes next will take “12, 18, 24 months” to unfold, according to Pick, who spoke this week at a New York financial conference.

“It’s an extraordinary moment; we have our first pandemic in 100 years. We have our first invasion in Europe in 75 years. And we have our first inflation around the world in 40 years,” Pick said. “When you look at the combination, the intersection of the pandemic, of the war, of the inflation, it signals paradigm shift, the end of 15 years of financial repression and the next era to come.”

Wall Street’s top executives making the rounds at financial conferences this week delivered dire warnings about the economy, led by JPMorgan Chase CEO Jamie Dimon, who said that a “hurricane is right out there, down the road, coming our way.” That sentiment was echoed by Goldman Sachs President John Waldron, who called the overlapping “shocks to the system” unprecedented. Even regional bank CEO Bill Demchak said he thought a recession was unavoidable.

Instead of just raising alarms, Pick — a three-decade Morgan Stanley veteran who leads the firm’s trading and banking division — gave some historical context as well as his impression of what the tumultuous period ahead will look and feel like.

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Yahoo Finance/Brian Sozzi
Gas prices: A ‘troubling sign’ emerges on the health of consumers

Sticker price shock at the gas pump may finally be breaking the back of the U.S. consumer, new data shows.

Current U.S. gasoline consumption levels are running 3% lower than a year ago and have been declining at a 3-5% clip the past seven weeks, according to researchers at DataTrek (chart below). DataTrek noted that these declines were not the case prior to April 2022, suggesting that pain at the pump is affecting consumer behavior.

“Given that commuting is the single most common reason Americans drive, we would have thought gas consumption would still be showing positive comps to last year,” DataTrek writes. “Office occupancy was barely 20% at this point last year and is double that now (43%). Lower gasoline consumption is therefore a troubling sign about overall consumer spending patterns.”

AAA data shows the national average for a gallon of regular, unleaded gas is at $4.76 as of Friday and above $5.00 in seven states.

Inflation — hitting necessities such as food, fuel, and housing — seems to be weighing on the minds of Americans: The University of Michigan’s final consumer sentiment measure fell to 58.4 in May, down from 59.1 earlier in the month, marking the lowest level in more than 10 years.

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