Cleveland Fed President Supports Tapering in November and is “Open Minded” about a Digital Dollar - Crypto News

Cleveland Fed President Supports Tapering in November and is “Open Minded” about a Digital Dollar

Cleveland Federal Reserve President Loretta Mester said Friday she supports the US central bank to start tapering its bond purchases at the next monetary policy meeting. Mester during a speech to the Ohio Bankers League said,

“In my view, the economy has met those conditions, and I support starting to dial back our purchases in November and concluding them over the first half of next year.”

However, this “should not be taken as a signal that the FOMC plans to raise the fed funds rate any time soon,” added Mester, who will be a voting member of the Fed’s interest-rate committee next year. According to her, the standard the Fed has set for the first-rate hike is expected to be met by the end of next year. Though the economy has “largely” met the Fed’s bar, it is still some distance from maximum employment,” she said. The Fed has been making a total of $120 billion purchase, $80 billion of Treasury bonds, and $40 billion of mortgage-backed securities each month since last summer while keeping the long-term interest rates virtually zero to support the economy. Earlier this week, Fed chair Jerome Powell said they could start paring down its purchases at its next meeting on Nov. 3. In her remarks, Mester said despite the resurgence of the coronavirus pandemic creating a headwind to growth; she expects a strong 5.5% growth rate this year. She also expected price pressure to wane over time, though inflation remains elevated relative to the Fed’s 2% target. As for the US unemployment rate, she sees it falling to 4.75% by the end of this year and then 4% next year. In August, the unemployment rate fell to 5.2%, from the April 2020 peak of 14.8%. Just before the pandemic struck in February last year, it recorded 3.5%. Mester also commented on a central bank digital currency, saying she is open-minded on the potential for having a US CBDC. But she wants policymakers to first think through how a digital dollar could affect financial stability and the banking system. “I’m actually at this point open minded,” Mester said during the event. A discussion paper on digital fiat is due to be released soon by the Fed that will lay out the costs and benefits and invite the public to comment, Mester said, adding that it will be important to generate broad consensus from the government and the public before moving forward with it.



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