Cleveland Fed Chairman Loretta Mester spoke of a “strong chance” that the US Federal Reserve would begin adjusting its bond-buying program.
He said future interest rate hikes should be driven by the economy, while noting that if inflation does not fall by the middle of the year then the Fed should remove the braces at a faster pace.
He also commented that the US Federal Reserve could move significantly faster and reduce the balance sheet, but clarified that the Bank will be careful in this plan to avoid disruption in the stock markets.
“I do not like to take anything off the table,” Mester said during a teleconference. “But, you know, I do not think there is any urgency to start with a 50 basis point interest rate increase.” He added that any meeting would be “in the game” and the pace of interest rate hikes would depend on what happens to inflation and the economy.
He emphasized that the decision was not a signal of a formal antitrust inquiry into the Fed.
He also stressed that the balance sheet is not the Fed’s main policy tool.
Source: Capital
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