One of the Federal Reserve's hawkish officials said on Sunday that while she prefers a slightly more aggressive approach, she is not opposed to her colleagues' view that the U.S. central bank needs to raise interest rates only four times this year.
Loretta Mester, president of the Cleveland Fed, told Reuters in an interview she does not need to see clear evidence of inflation to back more policy tightening after an initial rate hike in mid-December. The Fed could act at any policy meeting, including one later in January, she said.
After lifting rates for the first time in nearly a decade, the Fed said further moves would be gradual and dependent on how the world's top economy performs. The central bank last month forecasted four rate hikes in 2016, based on the median projection of its 17 top officials.
"I'm pretty comfortable with the median path ... I think that's not a bad description," Mester, who votes on U.S. monetary policy this year under a rotation, said on the sidelines of an American Economic Association meeting.
"I'm probably a little steeper than that in the near term, just because I have a higher growth forecast."
Mester expects the U.S. economy to grow at a 2.5 percent to 2.75 percent pace this year, slightly stronger than the 2.4-percent rate median forecast of her colleagues. That optimism allows her to view more than four rate hikes as appropriate, she said.
The comments from Mester, one of 10 voters on policy, suggests that while she leans toward marginally tighter policy than Chair Janet Yellen and others at the Fed, she may not be compelled to dissent.
"I think it's reasonable to move on a gradual path, and I'm going to look at the data that comes in between now and the next meeting," she said.
Last month's rate hike from near zero was much anticipated but could yet upset world financial markets as the Fed weighs when to make another move. Traders in futures markets are predicting only two or three hikes this year.
Like most Fed officials, Mester, who has run the Cleveland Fed for a year and a half, expects inflation to rebound as the effects of weak oil prices and the strong dollar wane.
"I don't see anything in the data that has changed the dynamics of inflation," she told Reuters.
Evidence of inflation is not necessary for her to back another rate hike as long as her forecasts hold, Mester said. "Right now my forecast is that we will gradually see inflation move back up to 2 percent."
The Fed's target for inflation, which has been below target for years, is also 2 percent.