Fed Mester Says CB Should Continue Raising Rates Despite Weak Data

The U.S. Federal Reserve has now met its employment goal and is nearing its inflation goal, despite some weak recent economic data, so it should continue raising interest rates, Cleveland Fed President Loretta Mester said on Monday.

In a speech that largely reinforced her upbeat view of the U.S. economy, Mester, a hawkish Fed policymaker, said that while risks are “roughly balanced” the central bank should not delay further policy tightening until its two key mandates are fully met.

“We have met the maximum employment part of our mandate and inflation is nearing our 2 percent goal,” Mester, who regains a vote on the Fed’s policy committee next year under a rotation, said at the Chicago Council on Global Affairs.



“Although we live in a high-frequency world, we cannot overreact to transitory movements in incoming data,” she said in prepared remarks.

The comments reinforced the expectation among most investors and Fed officials that the central bank will likely raise rates another notch in June, after having tightened twice since December, and do so yet again before year end.

Mester also repeated she would back starting the process later this year of shedding some of the $4.5 trillion in bonds in the Fed’s portfolio. She largely dismissed a weak inflation reading in March and soft overall economic growth in the first quarter as one-off events.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza