Cleveland Fed President Loretta Mester said she doesn’t support using negative rates as a monetary policy tool in the US. She noted, “the effects on the banking system and money market funds would make me not want to use that as a tool”.
On the economy, she said in a speech that a “reasonable baseline outlook”for the economy to grow again in H2 and unemployment begins to move down, as stay-at-home restrictions are lifted. But “achieving this outcome depends on a number of things falling into place”. A lot of conditions is just “another way of saying there is considerable risk”.
“It isn’t difficult to imagine more pessimistic scenarios, especially if an upsurge in virus cases necessitates shutting down activity again or if there is considerably more harm in terms of business and personal bankruptcies or if instabilities in the banking system arise,” she said. “At this point, I think some of the more pessimistic outcomes are almost as likely as the reasonable baseline I just described.
