MNI: Fed's Mester Says Ukraine Crisis Adds Risk To Outlook

Federal Reserve Bank of Cleveland President Loretta Mester said Thursday the Ukraine crisis adds risk to the economic outlook, but she is still on board with the central bank's shift to policy normalization.

"There are risks and uncertainty around the outlook, including those engendered by the geopolitical events unfolding today. My modal outlook continues to be that the strong economic expansion continues this year," Mester said in prepared remarks to the University of Delaware.

"I do expect some improvement in inflation readings later in the year as demand moderates and capacity constraints in both product and labor markets begin to ease. Nonetheless, I expect inflation to remain above 2 percent this year and next, and I see the risks to inflation as tilted to the upside," she said. "Geopolitical events add upside risk to the inflation forecast even as they put some downside risk to the near-term growth forecast."

While Mester repeated previous comments that she sees rates moving up in March and in the following months with potential for selling MBS at some point, she added "the implications of the unfolding situation in Ukraine for the medium-run economic outlook in the U.S. will also be a consideration in determining the appropriate pace at which to remove accommodation."