One of the most senior economists in the United States says that the world's largest economy is still in the grip of an inflation crisis that will likely persist for the foreseeable future.
Loretta Mester is the president of the Federal Reserve Bank of Cleveland, which means she is currently one of the 12 people who determine the official interest rate in America.
In an exclusive interview with the ABC, Ms Mester had a warning for Americans struggling under the pressure of steep price rises.
"I don't have enough evidence now to even conclude that inflation has peaked in the US," she said.
This puts her at odds with claims from US President Joe Biden, who said inflation "may be, may be — I'm not over-promising — may be beginning to ease".
Mr Biden has been under huge amounts of political pressure to put a lid on price rises, which have reached multi-decade highs this year.
His government welcomed news that America's Consumer Price Index (CPI) hit 8.5 per cent in July, which while still high was down from a 40-year peak of 9.1 per cent in June.
But some economists were cautious about the data, especially given recent examples of inflation slowing only to re-accelerate in subsequent months.
Another bright spot in recent months has been the fall in petrol prices in the US.
But Ms Mester said that happened during the height of the northern hemisphere summer and she does not believe the trend will continue downwards.
"There's good reason to think that come the winter, those prices could go back up," she said.
As temperatures chill in the global north, countries will be desperately competing for sources of gas and oil to heat homes and power businesses.
Those sources will be severely limited in the West because of sanctions on Russia in response to President Vladimir Putin's war in Ukraine.
'The Fed is going to have to do much more'
Ms Mester is one of the most informed people about the country's economic state and one of the most powerful in setting its economic direction.
She sits on the Federal Open Market Committee (FOMC) and meets with her fellow members eight times a year.
They review the economic and financial conditions and assess the risks to its long-run goals of price stability and sustainable economic growth.
So far this year they have hiked interest rates at an eye-watering rate — from effectively zero in March to more than 2.25 per cent today.
The Federal Reserve's most pressing goal right now is to tame inflation.
With CPI currently at 8.5 per cent, more work will need to be done to bring it back to the Federal Reserve's target of 2 per cent.
"I'm still very concerned about inflation, it's at unacceptably high levels," Ms Mester said.
"And I think the Fed is going to have to do much more to get that inflation data on that downward path."
That would likely mean hiking interest rates even higher for borrowers in the United States.
"My read right now is we'll probably have to bring the nominal Fed funds rate up a bit above 4 per cent by early next year, and then keep it there throughout the year," she said.
By raising interest rates, the Federal Reserve is attempting to drive up the cost of borrowing, causing people to spend less.
The hope is that this will take some demand out of the economy to bring it into balance with supply at a lower price point.
It is already having an impact in causing stock markets and housing prices to fall.
What about the possibility of recession?
Ms Mester knows each hike comes with risks, as the FOMC attempts to strike the right balance between taking some momentum out of the economy but not too much that it ends up stalling or going over the proverbial edge.
"We're going to hopefully be doing it in a way that the economy won't go into a deep recession," she said.
"But it's going to be somewhat painful, and it'll feel painful."
Recessions, which are usually defined as a significant decline in economic activity spread across the market, lasting more than a few months, are characterised by layoffs and asset price falls.
But even though interest rate hikes hurt borrowers and recessions lead to job losses, Ms Mester said the path of higher interest rates is one the country must endure.
"If we didn't do it, it would be worse," she said.
"If you're a lower-income family, you're having to make choices that are extraordinary choices."
She said she knew some Americans were making fewer trips to the grocery store or buying cheaper products to save money at the check-out.
"The longer it goes on, the more difficult it's going to get. So there's already a lot of pain from this high inflation," she said.
"And I think that's something to remember: This isn't about the future. This is like right now, there's a lot of pain here."
What Mester's warning means for Australia
The US remains the most important economy in the world and its vitality is crucial to the health of middle powers like Australia.
As the US continues to raise interest rates, it also puts pressure on — and gives space to — smaller countries to increase their own rates.
That's because the Federal Reserve has huge influence and operates in an interconnected global financial system.
So an increase in the cost of borrowing in the US can affect both the rates Australian banks borrow at and impact the value of the US dollar.
Meanwhile, out-of-control inflation has increasingly become a global problem, although the US has been dealing with it for longer than most.
Australia's CPI hit 6.1 per cent in the June 2022 quarter.
As a result, the Reserve Bank of Australia again raised interest rates this week by 0.5 of a percentage point, taking its cash rate target to 2.35 per cent.
If Ms Mester's predictions are correct, inflation will bedevil households and governments for the foreseeable future.
And that means interest rates will stay higher for longer too.
