Fed’s Mester Says, Fed can Increase Rates At Any Meeting

Cleveland Central Bank President Loretta Mester expressed yesterday that the central bank is ready to hike interest rates at any meeting and can look to shed mortgage-backed securities it is currently holding.

Mester said on Wednesday, “Each meeting is going to be in play. We are going to assess conditions, we are going to assess how the economy is evolving, we are going to be looking at the risks, and we are going to be removing accommodation.”

The market is widely anticipating the central bank to hike its short-term borrowing rate at its meeting in March. Traders are expecting at least four hikes this year.

Mester feels that it is time for the federal reserve to start reversing the historically easy measures it took during the Covid-19 pandemic crisis.

Mester added, “I don’t like taking anything off the table. I don’t think there’s any compelling case to start with a 50-basis point increase. Again, we’ve got to be a little bit careful. Even though you can well telegraph what’s coming, when you take that first action, there’s going to be a reaction.”

Mester is a voting member of the Fed Open Market Committee. She expressed that she will be observing inflation closely. If inflation declines, that will cause fewer rate hikes, but an increase in inflation will prompt the central bank to take more hawkish action.

Earlier yesterday, Atlanta Central Bank President Raphael Bostic also talked about several rate hikes this year and a rapid decline in balance sheet holdings.

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