The U.S. economy “can handle” an increase in interest rates despite the risks around the outlook, said Cleveland Fed President Loretta Mester, on Thursday. “It is appropriate for monetary policy to take a step back from the emergency measure of zero interest rates,” Mester said in a speech at New York University Stern Center for Global Economy and Business. Given the outlook, Mester said interest rates should move up gradually.
Fed officials are divided over whether to hike interest rates this year. As a result, traders who bet on the future path of the fed funds rate now expect the first hike to occur in March 2016, according to CME FedWatch. Mester will be a voting member of the Fed policy committee in 2016.