Cleveland Fed President Loretta Mester said a bigger-than-expected rise in the central bank’s preferred inflation gauge shows the need to keep raising interest rates, but stopped short of suggesting this warranted a step-up to a half-point hike next month.

“The inflation readings are still not where we need them to be,” she told Bloomberg News in an interview Friday in New York, shortly after data showed a 5.4% rise in the personal consumption expenditures price index in the 12 months through January. The report is “just consistent with the fact that the Fed needs to do a little more on our policy rate to make sure that inflation is moving back down,” she added.

Fed officials lifted their benchmark lending rate by a quarter of a percentage point at the start of February, bringing the target to a range of 4.5% to 4.75%. That was a step down from the half percentage-point increase at their December meeting, which followed four consecutive jumbo-sized 75 basis-point hikes. 

Mester, who does not vote on monetary policy decisions this year, said last week that she saw a “compelling” economic case for rolling out another 50 basis-point rate hike at the meeting earlier this month.

She declined to say if the latest PCE report nudged her toward favoring a half-point move when officials meet in March, but stressed the size of a move at any individual meeting mattered less than the ultimate peak for rates.

“Where we’re going is more important than what we tactically do at any one meeting” she said, adding “I don’t think we should prejudge.”

But she did note that the March meeting would be different because the Fed has already moderated the pace of its tightening action to 25 basis points and “we have to take that as part of the environment we’re in.”

In an earlier interview Friday with CNBC, Mester repeated her backing to get rates ‘somewhat’ above 5% this year and then stay there for a time.

Mester said on CNBC that her forecast in December for where interest rates would peak was “a little bit above” policymakers’ 5.1% median projection. She said her view hasn’t much changed since then.

“I do think we need to be somewhat above 5% and hold there for a time in order to get inflation on that sustainable downward path to 2%,” she said.

While inflation measures have shown signs of improvement, the level is still too high, Mester said.

U.S. central bankers are engaged in the most aggressive tightening campaign in a generation to quell high inflation. 

Minutes from the Jan. 31-Feb. 1 meeting showed that while policymakers agreed more rate increases were needed, almost all supported a step down in the pace of hikes to raise interest rates by 25 basis points at the meeting. The readout showed “a few” favored or could have supported a bigger 50 basis-point hike.

Prior to the Fed’s last meeting, investors expected the central bank to cut interest rates in the second half of 2023. But investors have tempered those bets and now see the Fed raising rates at the upcoming March, May and June meetings.