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Fed’s Mester: Economy will ‘work through this episode of market turbulence’

“It would guard against the risk that the economy might overheat and helps avoid a buildup of risks to financial stability, she added” writes Senior Economics Reporter for marketwatch.com. The sharp moves in the stock market seen over the past 10 days remain “far away” from being large enough to spill over and damage the economy, said Cleveland Fed President Loretta Mester, on Tuesday. “I expect the economy will work through this episode of market SPX, +1.39% DJIA, +1.70%  turbulence and I have not changed my outlook,” Mester said in a speech to the Chamber of Commerce in Dayton, Ohio.Read: ‘Risks of a recession’ are rising, says head of world’s largest hedge fund The Cleveland Fed President said a larger positive effect from the Trump tax cuts is one upside risk.Mester is considered one of the more hawkish Fed presidents. “Of course, this is my current view of monetary policy,” Mester said. “If upside risks to growth come to pass, we may need to steepen the path a bit: if inflation surprises to the downside, we may need to go a bit slower,” she added.Mester, who is a voting member of the Fed’s interest-rate committee this year, said she wanted the central bank to maintain its gradual pace of rate hikes this year and next “at a pace similar” to the three quarter-percentage-point moves in 2017. “I believe this gradual upward path of interest rates will help balance the risks and prolong the expansion,” Mester said.
 
Source: marketwatch.com



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