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The Fed: ‘The recovery is going to be a slow one,’ Fed’s Mester says

The Fed

Firms are slowing their hiring in her district, Cleveland Fed President says

Cleveland Fed President Loretta Mester at last year’s Jackson Hole summit.


Bloomberg

The U.S. economy is likely to continue to recover, but with fits and starts tied to progress on the coronavirus, a top Federal Reserve official said Friday.

“I do believe that the recovery is likely to be a slow one,” said Cleveland Fed President Loretta Mester, in an interview on CNBC.

“There is more pain out there that we are going to have to support the economy through,” Mester said.

Fiscal policy “is going to have to be at the table too,” she said.

Mester, who is a voting member of the Fed’s interest-rate committee this year, said that job growth has tempered in her districts as businesses remain uncertain.

The government will release August employment report next Friday.

Mester said the economy would move forward with “fits and starts.” That’s very similar to the outlook presented by Fed Chairman Jerome Powell in his speech to the Jackson Hole conference on Thursday.

Mester said the rise and fall in coronavirus cases is a key factor in the outlook.

In regions of the country where the virus picked up at the end of June, there was a slowdown in activity.

Mester is a voting member of the Fed’s interest-rate committee this year. Several top Fed officials are speaking Friday, a tradition around the central bank’s annual policy statement.

In at later interview, Philadelphia Fed President Patrick Harker said he thought job growth and consumer spending were moving sideways in August.

There are 27 million Americans on some form of unemployment, he said. The labor market won’t return to its pre-pandemic strength for quite a while.

“It will take a while for the employment situation to heal,” he said. Harker is also a voting member on the Fed’s interest-rate committee this year.

Asked how high he would tolerate inflation under the Fed’s new average inflation target strategy, Harker said the speed of inflation mattered just as much as the overall level.

Stocks were higher on Friday on expectation the new Fed policy means continued an easy policy stance for the central bank. The Dow Jones Industrial Average
DJIA,
+0.32%

was up 75 points in morning trading

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