Despite recent stock market turbulence, the fundamentals of the U.S. economy “remain sound,” Federal Reserve Bank of Cleveland President Loretta Mester said Thursday.
Speaking at a conference in New York, Mester delivered what amounted to a vote of confidence in the Fed’s expectations for raising rates several times this year, which have been drawn into question by falling stocks and other signs of rising concerns about global economic growth.
“Until we see further evidence to the contrary, my expectation is that the U.S economy will work through the latest episode of market turbulence and soft patch to regain its footing for moderate growth,” Mester said, countering fears of a rising risk of recession in the U.S.
Mester suggested that U.S. growth is likely to continue even if some of the fears about a slowdown in China prove true and falling oil and a strengthening dollar hurt U.S. drillers and manufacturers.
While falling oil prices will keep the Fed short of its 2 percent inflation goal for longer, Mester added, it’s still reasonable to expect that the target will be hit in the medium term.
Mester is a voting member of the Fed’s monetary policy committee. The committee maintained its target for short-term interest rates at 0.25 percent to 0.50 percent in January and will meet again in March.
Mester also addressed the question of when the Fed might begin shrinking its $4.5 trillion balance sheet in addition to raising rates. She said that she would feel “comfortable” ceasing reinvesting in the bonds the Fed has bought once interest rates have reached 1 percent.
