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- Fed's Mester: Don't think the Fed will put the economy into a sustained downturn
Fed's Mester: Don't think the Fed will put the economy into a sustained downturn
Cleveland Fed President and FOMC member Loretta Mester said in an interview on Tuesday with Yahoo Finance that she doesn't think the Fed is going to put the US economy into a sustained downturn, according to Reuters. Nonetheless, she added, the challenge for the Fed is a large one.
Unemployment may need to rise and there may be another negative GDP print, she continued. However, Mester said that there is a lot of positive momentum underneath the recent negative Q1 GDP print. It is important for the Fed to be raising interest rates to bring demand into balance with constrained supply, she said.
Ukraine and China both pose upside risks to inflation, she continued, adding that the US economy might see a couple of months where the unemployment rate rises, though this won't be sustained. Regarding recent stock market volatility, Mester called it "very uncomfortable" but necessary to get inflation down, and reiterated that the Fed needs to consider selling mortgage-backed securities. "We'll know more about the right size of the balance sheet as it shrinks," she added.
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