- Loretta Mester, Cleveland Fed President
Cleveland Federal Reserve President Loretta Mester said that the timing of monetary policy normalization is not as important as the overall pace of rate lifts. Mester expects the US economy to expand at a 3% pace this year and the consumer price inflation rate to move gradually higher toward the Fed's 2% goal after a temporary decline caused by a fall in the oil prices. Meanwhile, Federal Reserve policy makers and economists are warning about potential turbulence as the central bank moves to hike interest rates this year for the first time in nearly a decade. The US central bank has kept its benchmark short-term interest rate at near zero since December 2008, through six years of the financial crisis, recession and slow recovery. Now, with the US enjoying robust growth and strong job creation, the Fed is getting ready to start pulling back its support. Nearly all Fed board members projected in December that the first interest rate lift would take place this year.
The Fed in December pledged to be patient, and Chairwoman Janet Yellen said it was unlikely the central bank would begin raising rates at its next two policy meetings, scheduled for 27-28 January and 17-18 March. Federal Reserve Bank of Boston President Eric Rosengren said patience in raising rates is justified given low inflation and slow wage growth.
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