In a speech delivered yesterday, Cleveland Fed President Loretta Mester talked down recent market slump again. And as a known hawk, she continues to support further gradually remove of monetary policy accommodation ahead.
She said that “while a deeper and more persistent drop in equity markets could dash confidence and lead to a significant pullback in risk-taking and spending, we are far from this scenario.” And, “similar to the swings in the market we saw earlier this year, the movements of late do not seem to be signaling that investors are becoming overly pessimistic.”
On labor market, she noted that “we are beyond maximum employment”. Much of the explanation of “moderate wage growth”, lies with ” low levels of inflation and productivity growth over this expansion”. And, “I wouldn’t expect to see a strong acceleration in wages unless we see a strong pickup in productivity growth.” Meanwhile, she also emphasized that “maintaining stable inflation expectations will be the key to maintaining inflation at target.
Her full speech “The Economic Outlook, Monetary Policy, and Normal Policymaking Now and in the Future“.
