The economy can handle a rate hike, Federal Reserve Bank of Cleveland President Loretta J. Mester said Friday.
"My own assessment is that with the economic progress we've made and that I expect to continue, the economy can handle an increase in the fed funds rate," she said in prepared text of a speech to the City Club of Cleveland, released by the Fed. "In my view, if economic information continues to come in consistent with the outlook, then there will be a strong case that the conditions for liftoff have been met and it would be prudent for monetary policy to take a step back from the emergency measure of zero interest rates."
Policy will remain accommodative even with a rate hike, she said. "And while I would expect some reaction in financial markets to the first move in interest rates in over six years, I wouldn't expect financial conditions to tighten enough to affect the medium-term outlook."
All decisions about future hikes will be data dependent, she said, noting, "monetary policy is expected to remain very accommodative for some time to come, with rates expected to move up only gradually to more normal levels."
