Mester Still Sees Rates >4%; Would Favor MBS Sales At Some Point

Cleveland Fed President Loretta Mester speaks on "An Update on the Economic Outlook and Monetary Policy" - she is about to appear in an MNI Webcast on those topics. Note that she spoke on Aug 31 on similar themes and the prepared text is very similar to that post-Jackson Hole speech - including on inflation and on her rate hike path ("My current view is that it will be necessary to move the nominal fed funds rate up to somewhat above 4 percent by early next year and hold it there; I do not anticipate the Fed cutting the fed funds rate target next year.").

• She also still doesn't indicate a preference for a 50bp vs 75bp hike in September.
• However there are some nuanced changes/additions, mainly as it relates to last week's employment report:
• On selling MBS outright: "I would favor the FOMC’s considering selling some of our agency mortgage-backed securities at some point during balance-sheet reduction in order to speed the return of our portfolio’s composition to being primarily Treasury securities." This had been mentioned in the footnote to her previous speech, as a point of general agreement mentioned in the March FOMC minutes.
• On the labor market: "The unemployment rate rose in August, but at 3.7 percent, it remains very low. The increase in the unemployment rate partly reflects an increase in labor force participation."
• On wages: " More recent reports suggest that wage pressures may be beginning to stabilize, but they remain high." (Her previous speech didn't comment that wage pressures may be stabilizing.)