Cleveland Fed Chief Says CB Will Get Back to Higher Rates if Economy Performs

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.”

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