Former Cleveland Fed Pres. Mester: The path of the Iran war will determine the path of the economy

• Geopolitical events, particularly the Iran war, are seen as the primary determinant for the economy and monetary policy.
• The Fed is currently focused on inflation risks, which are exacerbated by higher energy prices and firms' willingness to pass on costs.
• Mester recommends the Fed hold rates for now to assess evolving risks, noting the US is more energy-efficient and an energy exporter, mitigating some downside.
• The labor market is in an 'uneasy balance' with low hiring, posing a potential risk if a shock creates imbalance, which the Fed will monitor using real-time data.

Former Cleveland Fed President Loretta Mester discusses the Fed's interest rate path, stating that the geopolitical situation (Iran war) will determine the economy's trajectory and subsequent monetary policy. She believes the Fed is rightly focused on inflation risks but should currently hold rates to assess the evolving balance between inflation and growth concerns.