Why Mester says monetary policy currently ‘well-calibrated’
Monetary policy is well positioned, Federal Reserve Bank of Cleveland President Loretta Mester said Monday evening.
“I believe that policy, for the time being, is well-calibrated to the economic outlook and the risks around that outlook,” Mester told the 50 Club in Cleveland, according to prepared text released by the Fed.
Mester said she “fully supported” the Federal Open Market Committee decision to leave the fed funds target range at 2.25% to 2.5% and its “wait-and-see approach regarding future rate adjustments.” The rate, she noted, “is now at the lower end of the range of FOMC participants’ estimates of its longer-run neutral rate, a level that neither stimulates nor restricts the economy and is consistent with maximum employment and price stability, and our most recent policy rate increases are still working themselves through the economy.”
The Fed “is in a very good spot” regarding its dual mandate of price stability and maximum employment, she said. Growth moderated from last year’s above-trend pace and labor markets remain strong. Despite a lower than sustainable unemployment rate, inflation remains near 2%, with no signal of appreciable acceleration.
“In my view, monetary policy does not appear to be far behind or far ahead of the curve,” Mester said. “This environment gives us the opportunity to continue to gather information on the economy and assess our forecast and the risks, before making any further adjustments in the policy rate.”
If the economy moves as she expects, Mester said, “the fed funds rate may need to move a bit higher than current levels. But if some of the downside risks to the forecast manifest themselves, and the economy turns out to be weaker than expected and jeopardizes our dual mandate goals, I will need to adjust my outlook and policy views.”