Fed official Mester: No compelling reason to stop rate hikes

Cleveland Fed President Loretta Mester told the Financial Times that she sees no “compelling reason” to expect more rate hikes.

“I really don’t see a compelling reason to stop rate hikes,” Mester said. “Until there is less uncertainty about where the economy is headed, I can see more compelling reasons to keep rates there,” she said.

Mester took issue with recent proposals by some policymakers, who argued that the Fed should abandon the rate hike at its June meeting. Mester also argued that the federal debt ceiling deal removed a lot of uncertainty about the US economy.

DOES THE FED TAKE SOME TIME?

Mester’s comments were taken as a sign of new divergences among US politicians.

Some officials thought the economic outlook had cleared up and interest rate hikes should be suspended in June. Fed Chairman Jerome Powell has also recently hinted that he supports a pause, citing the number of rate hikes the Fed has implemented.

Powell said developments in the banking sector contributed to tightening credit conditions and interest rates may not need to rise as much as they normally should.