Cleveland Fed President Loretta Mester’s Insights on the Economy: Balancing Slowdown and Inflation Concerns, and Managing Commercial Real Estate Risks

Cleveland Fed President Loretta Mester discussed the current state of the economy in a question and answer session. She mentioned that there is some slowing in the economy, but it is rebalancing. Despite signs of economic strength, disinflation can still occur. She also expressed her belief that the neutral rate will not be as low as it was previously.

Mester anticipates slower employment growth and a slight uptick in the unemployment rate, although healthy labor markets are expected to remain intact. She acknowledged that the average family is still struggling with inflation, which could explain the sour consumer mood.

In terms of commercial real estate risks for banks, Mester stated that they are manageable. Additionally, she highlighted the efforts of the Fed in ensuring that banks are prepared for the discount window.

Regarding US yields, they were mixed and had retreated from their highest levels. The 2-year yield was at 4.695%, down by 2.3 basis points. The 5-year yield was at 4.346%, up by 0.9 basis points, while the 10-year yield was at 4.359%, up by 3 basis points, and the 30-year yield was at 4