Fed Mester Believes More Rates Hikes Needed

A Federal Reserve policymaker on Thursday repeated her call for further rate hikes and a trimming of the central bank’s balance sheet later this year, as the U.S. economy is expected to rebound from what looks like a weak first quarter.

“If economic conditions evolve as anticipated, I believe further removal of accommodation via increases in the fed funds rate will be needed,” said Cleveland Fed President Loretta Mester, a hawkish policymaker who regains a vote on interest rates next year. “I would (also) be comfortable changing our reinvestment policy this year.”

The Fed raised rates in mid-March, its second policy tightening in three months. The central bank has also been topping up a $4.5 trillion portfolio of bonds amassed in the wake of the financial crisis, but plans to eventually begin shrinking it by letting the assets mature.

While the economy has been expanding at a 2-percent rate over the last few years, the Atlanta Fed’s GDPNow forecast predicts it dipped to 1 percent in the first three months of the year.

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