Fed’s Mester Says She’s ‘Comfortable’ With Rates Moving Higher

  • Market participants, Fed now thinking of economy in same way
  • Economy is on ‘sound footing,’ Mester says in Singapore speech

Fed's Mester Says U.S. Economy Is on 'Sound Footing'

Federal Reserve Bank of Cleveland President Loretta Mester said she would be “comfortable” with the central bank raising interest rates now as inflation pressures pick up.

While the Fed isn’t “behind the curve” on interest rates yet, delaying policy tightening will create risks, Mester said in reply to questions after a speech delivered in Singapore on Monday.

“I’d be comfortable with an increase in the Funds rate at this point, if the economy keeps going the way it’s going,” she said. “My outlook builds in a gradual increase in the Funds rate over time. And I’m comfortable with that.”

Investors have raised their bets of a U.S. rate increase as early as March or May after relatively hawkish congressional testimony last week from Fed Chair Janet Yellen and a strong inflation reading for January. Mester said market participants and the Fed are now “thinking about the economy in the same way.”

“In my mind, where the economy is now argues that we should be bringing the rate up,” she said. “But no one on the Fed, I would say, is thinking of precipitously raising.”

In her speech to the Global Interdependence Center conference, Mester said the U.S. economy is on a “sound footing” and it had taken a set of “extraordinary actions” outside what’s considered normal monetary policy to achieve that outcome.

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