REPEAT: MNI: 5 Things: Fed's Mester Outlines Framework Debate

Repeats Story Initially Transmitted at 06:45 GMT May 14/02:45 EST May 14

By Jean Yung

     WASHINGTON (MNI) - Here are five key points from Federal Reserve Bank of

Cleveland President Loretta Mester's prepared remarks at the Global

Interdependence Center Central Banking Series with Banque de France in Paris on

Monday: 

     - "Too soon" to declare victory on inflation though headline PCE inflation

hit 2% in March and core PCE inflation hit 1.9%, Mester says. That echoes a

number of other Fed officials' remarks coming out of the May FOMC meeting. She

expects the economy to hit the Fed's inflation target "on a sustained basis"

within the next year or two. 

     - No change in her policy assessment that a gradual path of tightening

remains appropriate to balance risks on either side. 

     - Mester outlines several longer run framework debates currently taking

place at the Fed. The FOMC needs to decide to stick with its post-crisis floor

system for implementing monetary policy, or to return to the pre-crisis corridor

system. 

     - Part of that consideration will be whether the fed funds rate will remain

the "best indicator of the general level of short-run interest rates." 

     - The FOMC needs to also review alternative inflation targeting frameworks

to evaluate whether any are better than the current framework of a point target.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com