(Reuters) - While easy monetary policy can support the U.S. economy in the long term, more fiscal help may be needed in the short term to carry the economy through the pandemic, Cleveland Federal Reserve Bank President Loretta Mester said on Wednesday.
Mester reiterated her view that monetary policy is “in a good spot.”
“Fiscal policy is the tool that you need to really direct ... relief to get through this period,” Mester said during a virtual discussion with former Fed presidents organized by the Council for Economic Education.
The Fed official repeated her view that the economic activity could pick up in the second half of the year if most Americans are vaccinated against the coronavirus by the third quarter.
Mester said she is not concerned that the Fed could be late to responding to higher inflation because the relationship between the labor market and inflation is weaker than it has been in the past.
“There’s a lot of structural pressures that keep inflation down,” Mester said. “My concern now is that we can get to the place where we’re post vaccine.”
Fed officials agreed at last month’s policy setting meeting to keep supporting the economy by leaving interest rates near zero and to continue purchasing $120 billion in bonds. Mester said the moment at which policymakers might start to withdraw that support would be apparent to investors because the economy will be in a stronger place.
“We want to avoid a taper tantrum,” Mester said. “It’s going to be based on what’s the outcome in the economy. That’s transparent to everyone.”
Reporting by Jonnelle Marte; Editing by Leslie Adler and Aurora Ellis
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February 04, 2021 at 05:51AM
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Fed's Mester says more fiscal help may be needed in short term - Reuters
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