19 C
New York
Wednesday, August 17, 2022

Cleveland Fed’s Mester: Wage bump signals Fed, economy on track

Cleveland Fed's Mester: Wage bump signals Fed, economy on track© Reuters. Loretta Mester, president of the Federal Reserve Bank of Cleveland, speaks during an interview in Manhattan, New York

BOSTON (Reuters) – Continued job growth and the fastest wage increases in nearly a decade leave the Federal Reserve’s current plans for interest rate increases intact, with no sign the economy is yet overheating, Cleveland Fed President Loretta Mester said on Friday.

Mester, a current voter on rate policy who has been among the most concerned about inflation and financial stability risks, said that the U.S. employment report for August released earlier on Friday was “strong” and a sign that pay increases have spread across industries and to weaker parts of the country.

“I see it as very positive news and a piece of the evidence that suggests this gradual raising of interest rates is appropriate for the economy,” Mester said on the sidelines of an economic conference here. “I don’t see it as this big breakout of inflation.”

In a situation in which the Fed has in effect met its goals of roughly full employment and 2 percent inflation, “the case for bringing up rates…is very compelling,” she said.

The Fed is expected to raise rates at its next policy meeting later this month, and fresh economic forecasts at that meeting will indicate if, as currently expected, a further increase remains likely in December.

In recent days, the comments of presidents of some of the regional Federal Reserve banks has been consistently upbeat — from New York Fed President John Williams referring to a “goldilocks” moment for the Fed, and Dallas Fed president Robert Kaplan saying increases were likely to extend well into next year before there is any thought to pausing.

Indeed, if anything, the dialogue at the central bank has shifted in recent months toward the need to guard against possible “upside” risks should the economy start growing at a pace that is considered unsustainable, or show signs that asset markets have become stretched.

Mester, who in the past has been vocal about such risks, said she did not see signs of that yet, though she reiterated her support for using a Fed tool to raise capital levels for banks as a buffer against any downturn.

“Some asset prices are high relative to historical values. There are signs of some financial imbalances,” Mester said. But, she added, “I would not say we are on the brink of anything breaking out.”

For now, she said, “a gradual upward path seems appropriate. … We are basically at or beyond full employment. … We are at 2 percent inflation and I would expect by the end of the year to be able to say sustainably so. We have strong growth.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source: Investing.com

Related Articles

Stay Connected

- Advertisement -

Latest Articles

Popular Articles