Fed’s Mester Does Not Want to Wait too Long for Hike
Investors to Sift for Clues on Fed Hike
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