Fed official: US economy on 'sound footing', Latest Business News - The New Paper

Fed official: US economy on 'sound footing'

This article is more than 12 months old

WASHINGTON: The US economy is on "sound footing", a hawkish Federal Reserve official said yesterday in a speech that cautioned against asking the central bank to solve problems beyond its control, such as low productivity growth.

Cleveland Fed president Loretta Mester, at a forum in Singapore, did not comment specifically on interest rates.

However, she has dissented in the past in favour of quicker rate hikes, and yesterday urged the Fed to focus on returning to a more normal policy footing, including trimming its US$4.5 trillion (S$6.4 trillion) bond portfolio.

The Fed has raised rates twice in two years, and expects to pick up the pace of tightening this year as unemployment, at 4.8 per cent, has fallen to near an equilibrium level, and as the Republican-controlled White House and Congress are expected to provide fiscal stimulus.

The US economy is "now on sound footing", Ms Mester, who does not vote on monetary policy until next year, said in prepared remarks to the Global Interdependence Centre.

But she said: "I am very doubtful that monetary policy could be targeted to spur a strong pickup in the types of investment in human capital and physical capital that would raise productivity growth." 

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