Fed’s Mester Predicting Strong Growth for Economy

Hawkish policymaker Loretta Mester, president of the Cleveland Federal Reserve, praised the recent rise in interest rates, saying it was a good first step to more normal monetary policy. She said it sent a positive message that the US economy will continue making gains.
“I fully supported the … December action,” Mester said, referring to the interest rate increase from almost zero. The Feds had refrained from raising rates for the better part of a decade.

“It was prudent to take the first step on the path of gradual normalization of interest rates,” she said in prepared remarks, and “an indication of monetary policymakers’ confidence that the economic progress we have seen in recent years will continue.”

Although the interest rate hike was much anticipated and was also modest, there is still a fear that the move could unbalance some financial markets. The Fed will be assessing the effects of their decision, and will continue to make decisions which could influence the success of the economy and world markets.

Mester predicted “above trend” GDP growth of between 2.5 to 2.75 percent for the last quarter of 2015, and similar numbers for the entire 2016. She is also forecasting growth in wages and continued improvement in the US labor market. Unemployment stands at about 5 percent, close to half of what its recessionary high was.