Financial stability risks and vulnerabilities are moderate – Loretta Mester

The monetary policy of the United States Federal Reserve will have to be very flexible for some time to support the expansion of the economic recovery, the president of the Cleveland Federal Reserve Loretta Mester, Reuters reported.

Featured statements

“The future direction of the Fed is fully consistent with the revised monetary policy strategy.”

“In the absence of inflationary pressures or risks to financial stability, the Fed will not react to strong labor market indicators.”

“While it may take some time for supply disruptions to subside, the forces that have weighed on inflation are still present.”

“I would not consider the expected inflation increase for this year to be the kind of sustainable increase necessary to meet future guidance on the Fed’s policy rate.”

“The Fed is expected to be deliberately patient unless there is clear evidence that inflationary pressures will push inflation out of the path desired by the central bank.”

“We need to see more improvements in the labor market before we consider the conditions of our future guidance on asset purchases to be met.”

“It is not clear that all labor market indicators should be expected to return to the levels seen in February 2020.”

“Fed policy makers will need to use judgment rather than a mathematical formula to assess the health of the labor market and its progress.”

“In tune with the risks and vulnerabilities in the financial system associated with a highly accommodative policy.”

“Valuations in the residential real estate and equity markets are high, reflecting investors’ high appetite for risk, low interest rates and a positive outlook for the economy.”

“The risks and vulnerabilities to financial stability are moderate.”

“Addressing the weaknesses in the treasury market and the non-bank financial sector should be a top priority.”

“The coronavirus pandemic has shown that things can evolve in a materially different way than expected.”

Market reaction

These comments do not appear to have a noticeable impact on the performance of the USD against its rivals. At time of writing, the US Dollar Index was up 0.05% on the day at 91.33.

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