U.S. interest rates may need move “a bit higher” if the economy performs as expected, a top U.S. Federal Reserve policymaker said on Thursday.
Federal Reserve Bank of Cleveland President Loretta Mester said she backed the central bank’s stance of keeping interest rates steady for the moment between 2.25 and 2.5 percent but that she expects a first-quarter U.S. slowdown to be “temporary.”
“Could we be done with policy rate increases this cycle,” she said in remarks prepared for delivery in Columbus, Ohio. “It is possible, but if the economy performs along the lines I think is the most likely case – with growth picking back up to, or slightly above, trend, labor markets remaining strong, and inflation staying near 2 percent – the fed funds rate may need to move a bit higher than current levels.”
Mester, who is not voting on policy this year but takes part in the deliberations, also said the Fed will be making decisions on how to transition its asset holdings to mainly Treasuries “at coming meetings.”