Fed’s Mester: Still expects the Fed can cut rates later this year but not at next meeting

Cleveland Fed President Loretta Mester on the economic outlook:

• Doesn’t see case to cut at the next Fed meeting
• Fed policy in a good place to navigate risks
• Fed can cut rates gradually if economy meets expectations

Mester is a hawk but she’s not exactly hawkish here. If anyone was going to say it was time to think about holding all year or hiking, it would be her or Bowman.

• Bigger risk to policy is to cut rates too soon
• Strong economy gives Fed space to take stock before cutting rates
• Does not expect smooth path back to 2% inflation
• Risks to economic outlook have become more balanced
• New sees longer-run Fed funds at 3.0% vs 2.5%
• Now sees GDP just above 2% this year
• Sees labor market in better balance.
• In her view, the inflation picture hasn’t changed much this year. She had assumed slower progress on inflation
• Says her forecast is similar to the median in the SEP

This article was written by Adam Button at www.forexlive.com.