Fed's Mester Says She's `Comfortable' With Rates Moving Higher

(Bloomberg) -- Federal Reserve Bank of Cleveland President Loretta Mester said she would be “comfortable” with the central bank raising interest rates now as inflation pressures pick up.

While the Fed isn’t “behind the curve” on interest rates yet, delaying policy tightening will create risks, Mester said in reply to questions after a speech delivered in Singapore on Monday.

“I’d be comfortable with an increase in the Funds rate at this point, if the economy keeps going the way it’s going,” she said. “My outlook builds in a gradual increase in the Funds rate over time. And I’m comfortable with that.”

Investors have raised their bets of a U.S. rate increase as early as March or May after relatively hawkish congressional testimony last week from Fed Chair Janet Yellen and a strong inflation reading for January. Mester said market participants and the Fed are now “thinking about the economy in the same way.”

“In my mind, where the economy is now argues that we should be bringing the rate up,” she said. “But no one on the Fed, I would say, is thinking of precipitously raising.”

In her speech to the Global Interdependence Center conference, Mester said the U.S. economy is on a “sound footing” and it had taken a set of “extraordinary actions” outside what’s considered normal monetary policy to achieve that outcome.

--With assistance from Richard Miller

To contact the reporter on this story: David Roman in Singapore at droman16@bloomberg.net.

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke

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