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Fed’s Mester On Board With November Taper, 2022 Rate Rise

Federal Reserve Bank of Cleveland leader Loretta Mester said Friday she supports the U.S. central bank beginning the process of slowing its bond buying stimulus effort starting at the next monetary policy meeting.

“In my view, the economy has met those conditions, and I support starting to dial back our purchases in November and concluding them over the first half of next year,” Ms. Mester said in the text of a speech.

Her comments on the Fed’s now $120 billion per month in Treasury and mortgage bond buying follow this week’s Federal Open Market Committee meeting. Then, Fed Chairman Jerome Powell also said the November FOMC was a likely time to pare back central bank support, saying “I think if the economy continues to progress broadly in line with expectations, then I think-and also the overall situation is appropriate for this-then I think we could easily move ahead at the next meeting, or not, depending on whether” the Fed gets what it wants to see on the job and inflation fronts.

At the Fed meeting, central bank forecasts also brought forward expectations of a first central bank rate rise off near zero levels to next year. Ms. Mester concurred with that view, saying “I expect that the conditions for liftoff of the fed funds rate will be met by the end of next year” assuming the recovery process continues.

In her remarks, Ms. Mester said the resurgence of the coronavirus pandemic will create a headwind to growth, but she still expects the U.S. to book a strong 5.5% growth rate this year. She sees the unemployment rate falling to 4.75% by the end of this year and to 4% next year, and while inflation is now elevated relative to the Fed’s 2% target she expects price pressures to wane over time.
Source: Dow Jones

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