A strengthening economy will allow for more tightening of monetary policy as the year goes on, Cleveland Fed President Loretta Mester said Friday.
Even as other prominent Fed officials, including Chair Janet Yellen, recently have issued more cautionary tones, Mester said during a speech in New York that the economy is growing enough for the central bank to continue down the path of normalization.
"The policy path I foresee as appropriate today is slightly more gradual than the path I foresaw in December, partly because of the slight downward revision to my growth forecast but mainly because I now estimate a lower longer-run equilibrium interest rate. But these are small changes," she told the New York Association for Business Economics, according to prepared remarks. "The important point is that the economy has shown considerable resiliency, and in my view, the outlook and risks around the outlook will likely support gradual reductions in the degree of accommodation this year."
The remarks come just two weeks after the Federal Open Market Committee, of which Mester is a voting member, declined to raise rates. In doing so, Fed officials indicated that a policy path that once had included expectations for four hikes in 2016 now shows just two moves.