Fed's Mester : Fed and Fiscal Policy Should Continue to Support Recovery

By Michael S. Derby

*Fed's Mester: Fed And Fiscal Policy Should Continue To Support Recovery

*Mester: Fed Policy Should Remain 'Patiently Accommodative'

*Mester: Fed Policy Well Suited To Deal With Current Economic Contingencies

*Mester: Fed Will Adjust Policy If Recovery Much Stronger Than Expected

*Mester: Economy Has Been More Resilient Than Expected

Cleveland Fed leader Loretta Mester said Tuesday the economy will continue to need strong government support this year, in comments that suggested she viewed the current setting of monetary policy as well suited to deal with positive and negative developments this year.

"Based on my current outlook and assessment of risks around the outlook, it will be appropriate for monetary policy to be patiently accommodative, " and joined with broader government actions, to deliver a positive performance for the economy as it emerges from the coronavirus pandemic, Ms. Mester said in the text of a speech.

"A slowdown in the economy in the first part of the year along the lines I am expecting would not require a change in monetary policy so long as the medium-run outlook remains intact," Ms. Mester said. "Nor would the strengthening in growth I expect to see later this year necessitate a change in our policy stance because I expect that the economy will still be far from our employment and inflation goals," the official added.

Ms. Mester was a voting member of the rate setting Federal Open Market Committee last year, but won't have a vote this year. The Fed currently has its short-term rate target at near zero levels and has indicated it will stay there for several years to come. The Fed is also buying bonds at a hardy pace to keep long-term borrowing costs down and support markets.

In her prepared remarks, Ms. Mester didn't offer firm guidance on what she wants to have happen with the asset buying effort.

Ms. Mester said there's considerable uncertainty about the economy right now as vaccines roll out to the public. But she also warned that unexpected developments in the economy could change the Fed's policy path.

"The resiliency shown by the economy so far suggests there is also the possibility that the post-vaccination recovery could be stronger than expected," Ms. Mester said. "In either case, consistent with our forward guidance, Federal Reserve policymakers stand prepared to respond appropriately to continue to foster a broad-based sustainable recovery," she said.

Write to Michael S. Derby at [e-mail]

(END) Dow Jones Newswires

01-12-21 1231ET