Fed’s Mester Says CB Should Stand its Ground on Rates

The Federal Reserve can afford to stand its ground on interest rates while it watches how challenges to economic growth unfold, Cleveland Fed President Loretta Mester said Tuesday.

Speaking in London, the central bank official said she holds a “positive baseline outlook” on the economy though she is monitoring risks to determine whether the Fed should cut interest rates, as the markets are currently demanding.

“At the present time, I believe it is too soon to make that determination, and I prefer to gather more information before considering a change in our monetary policy stance,” Mester said, noting that the expansion has proven “resilient to a variety of shocks, headwinds and uncertainties” that ultimately have reversed.

Mester is a nonvoter this year on the policymaking Federal Open Market Committee, though she still offers input into its decisions. She has been one of the more hawkish members, meaning that she has been in favor of the move higher in interest rates over the past several years.

The market is pricing in a 100% chance of at least a quarter-point rate cut at the July 30-31 FOMC meeting and likely another 50 basis points lower before the end of the year. Investors have been worried over slowing global growth, low inflation and the impact of the U.S.-China trade battle, which Mester said has had “relatively modest” effects though the “concern is growing.”

via CNBC

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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