By Laurie Laird
LONDON (MaceNews) – The Federal Reserve will continue to monitor economic data closely ahead of its rate setting meeting March 17-18 according to Cleveland Federal Reserve President Loretta Mester, raising the prospect of another rate cut at that meeting.
Addressing a group of economists in London Tuesday night, Mester stressed that members of the Federal Open Market Committee will “consider all new information” at the scheduled meeting in March. Her comments came hours after the Fed announced a larger-than-expected half-point reduction in its benchmark rate to a range of between 1.0 and 1.25 percent, in response to the economic uncertainty caused by the spread of coronavirus.
Mester, long regarded as one of the more hawkish members of the FOMC, confirmed her “support” for the rate cut, despite acknowledging that the supply shocks to the economy “are not things that can be affected by lowering interest rates.” But, echoing comments from Fed Chair Jerome Powell earlier in the day, Mester stressed the importance of monetary policy in supporting household and business confidence, to ensure that a supply shock does not evolve into a “demand shock.”
Mester also discussed the possibility of negative interest rates in the U.S., despite expressing her “skepticism” that sub-zero rates would be appropriate for the American economy. However, she acknowledged that her disregard for negative rates was a personal view, and not necessarily representative of the FOMC.
The Fed’s emergency move on Tuesday raised speculation that the European Central Bank may be forced to follow suit with an easing of policy ahead of the governing council meeting on March 12. A well-placed European source told Mace News that the ECB could announce new short-term liquidity operations soon.