Fed’s Mester Does Not Want to Wait too Long for Hike

In­vestors to Sift for Clues on Fed Hike

The Economic Times - - Commodities Plus -

Jonathan Spicer

New York: The Fed­eral Re­serve should still raise in­ter­est rates grad­u­ally this year given the econ­omy’s re­silience, a top Fed of­fi­cial said on Fri­day, ex­plain­ing that she did not want to wait too long de­spite hav­ing sup­ported last month’s de­ci­sion to stand pat. In bal­anced com­ments that sug­gested she was poised to back a rate hike soon, Cleve­land Fed pres­i­dent Loretta Mester said she did not dis­sent against the cen­tral bank’s March pol­icy de­ci­sion due to “lim­ited” eco­nomic data on the first quar­ter.

And while the Fed is not yet “be­hind the curve,” she said, there is a risk in wait­ing too long to fol­low up on Dec’s 0.25% rate hike.

“Wait­ing un­til ev­ery piece of data lines up in the cor­rect way means wait­ing too long and risks hav­ing to move rates up more ag­gres­sively in the fu­ture, with neg­a­tive im­pacts on our econ­omy,” Mester, who has a vote on Fed pol­icy this year un­der a ro­ta­tion, told the New York As­so­ci­a­tion for Busi­ness Eco­nom­ics. “The econ­omy has shown con­sid­er­able re­siliency, and ... the outlook and risks around the outlook will likely sup­port grad­ual re­duc­tions in the de­gree of ac­com­mo­da­tion this year,” said Mester, seen as


Af­ter en­dur­ing weeks of con­flict­ing com­ments by Fed­eral Re­serve of­fi­cials that whip-lashed the US stock mar­ket, be­fud­dled in­vestors could get a dose of clar­ity next week on where the Fed stands on its path to­ward rate hikes. Min­utes of the Fed’s March meet­ing will be re­leased on Wed­nes­day, giv­ing in­vestors a chance to comb through the sum­mary for tips on when rate in­creases will hit. If traders be­lieve that less vo­cal pol­i­cy­mak­ers will sup­port Fed Chair Janet Yellen’s ex­pressed go-slow ap­proach to rais­ing in­ter­est rates, they may bid up stocks fur­ther. — Reuters

hawk­ish but prag­matic on pol­icy. Af­ter tight­en­ing in De­cem­ber for the first time in a decade, the Fed left pol­icy un­changed two weeks ago in the face of an overseas slow­down and early-year mar­ket tur­moil. The next pol­icy meet­ing is set for April 26-27, fol­lowed by one June 14-15. Mester said that, since De­cem­ber, she had slightly down­graded her ex­pec­ta­tions for rate hikes this year though she did not give a num­ber.

In a Jan­uary in­ter­view with Reuters, she said she backed four hikes in 2016.—Reuters

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