Fed's Mester calls for key 'considerable time' language to be reformulated

The Federal Reserve should reformulate key policy language on keeping interest rates low for a "considerable time," the president of the Cleveland Fed said on Wednesday.

Loretta Mester, a voting member of the Federal Open Market Committee, said the controversial phrase is too reliant on the calendar as opposed to data.

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The phrase, which appears in the Fed's monetary policy statements, is linked to the completion of the central bank's latest quantitative easing program:

"The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored."

There was heavy speculation before last week's Fed meeting that the phrase might be dropped, a potential sign that interest rate hikes were coming sooner. It remained in the statement, though.

Mester, in remarks prepared for delivery Wednesday, said the Fed should instead rely on its own forecasts for forward guidance.

In Mester's first speech as president of the Cleveland Fed, delivered earlier this month, she called on the central bank to revise its forward guidance on interest rates.

In Wednesday's remarks, Mester also forecast above-trend economic growth for the next couple of years and said the economy was on firmer ground than it had been for some time.

Separately Wednesday, Chicago Fed president Charles Evans addressed the economy, saying the Fed should be "exceptionally patient" in adjusting policy.

He also called for the path of rate increases to be kept "shallow."