Cleveland Fed President Loretta Mester said in a speech that the most likely case this year is that “the economy will transition toward a more sustainable pace of growth, with continued strength in labor markets and inflation near 2 percent.” And if this case realizes, ” fed funds rate may need to move a bit higher than current levels.
Though, she also emphasized that Fed must “remain attentive to several risks to the outlook, including the slowdown in global growth, uncertainty over trade policy, tighter financial conditions, and the changes in business and consumer sentiment”. If some of the risks manifest themselves, and, economy turns out to be weaker than expected, she will need to adjust her outlook and policy views.
For now, federal funds rate are now at the lower end of the longer-run neutral level. Monetary policy is “neither ahead of nor behind the curve”. She said “we can take the time to make that assessment. ”
