MNI: Fed Policy Is In A Good Place To Assess Data - Mester

Cleveland Federal Reserve President Loretta Mester said Wednesday there has has been progress on inflation and monetary policy is in a good place to assess incoming data amid an uncertain outlook, but she left open the possibility that the Fed's policy rate may have to go higher.

"Monetary policy is in a good place for policymakers to assess incoming information on the economy and financial conditions and judge whether policy is well calibrated to ensure that inflation is on a timely path back to 2%," she said in prepared remarks.

"Whether the fed funds rate needs to go higher than its current level and for how long policy needs to remain restrictive will depend importantly on whether the economy is evolving as expected, how the risks are changing, and the progress being made on our dual mandate goals of price stability and maximum employment," she said. (See: MNI POLICY: Fed Likely Done Hiking, Focused On Length Of Hold)

NIMBLE POLICY STANCE

Mester noted that inflation has run well above the central bank's 2% goal for more than two years. "While it is still above our 2% goal, there has been discernible progress on inflation even while the overall economy has remained relatively strong. It will take some time to get inflation back down to 2%, but the FOMC is committed to doing so."

The Fed is facing an uncertain economic environment, the Cleveland Fed chief said, pointing to a slowdown in the Chinese economy, the Israel-Hamas war, the ongoing war in Ukraine, and heightened geopolitical tensions that pose risks to the medium-term outlook.

Mester is a FOMC voter in 2024 but is set to retire at the end of June.

"In an uncertain economic environment, it is important to look at various models and various scenarios, because the economy could evolve quite a bit differently than expected. If it does, monetary policy will need to be nimble and respond appropriately to the evolving outlook and to the risks to achieving both parts of our dual mandate. I believe the current level of the funds rate positions us well to do that," she said in a speech at Loyola University Chicago that also touched on financial stability.