NEW YORK MaceNews) – Cleveland Federal Reserve President Loretta Mester said monetary policy needs to stay “very accommodative” and she agrees with her colleagues that the federal funds target should remain unchanged through 2022.
In remarks for delivery on a webinar, said she and her colleagues agree a recovery is under way beginning in the second half of 2020 as the economy reopens, and will unfold over the next few years.
“The uncertainty surrounding the outlook is extremely high because we are in an unprecedented situation,” depending largely on the course of the virus, she said.
“Outcomes depend not only on appropriate economic policy but also on public health considerations,” she said.
“So at this juncture, I think it makes sense for monetary policymakers to continue to monitor the economy as the country begins to re-engage in economic activity, to continue to support the flow of credit to households and businesses and ensure the smooth functioning of financial markets, to remember that there are several different scenarios that could play out, and to stand ready to use all of our tools to mitigate lasting damage and to support the economy’s recovery back to maximum employment and price stability,” she said.
“I think it’s just going to take some time, and at the Fed, we want to be there to support the recovery,” she said during a question and answer period.
Asked about negative interest rates, Mester said they are not under active consideration at the Fed, she would not support their use, and that negative rates would have adverse effects in the US financial setting.