The economy can handle a rate hike and such a move is “appropriate,” Federal Reserve Bank of Cleveland President and CEO Loretta J. Mester said Thursday.
“Based on my current assessment of the outlook and the risks around the outlook, I believe the economy can handle an increase in the fed funds rate and that it is appropriate for monetary policy to take a step back from the emergency measure of zero interest rates,” Mester said at a New York University conference, according to prepared text released by the Fed. “A small increase in interest rates from zero is not tight monetary policy. Indeed, I anticipate that beyond liftoff, economic developments will likely mean it will be appropriate for monetary policy to remain very accommodative for some time to come, supporting continued expansion and providing some insurance against downside risks, with rates expected to move up only gradually to more normal levels and with the decisions about that path dependent on incoming information on the economy’s performance and risks to that performance.”
A delay in raising rates, could cause pushing up rates “more aggressively later on.”
