UPDATE 1-Fed’s Mester Supports Phased Start in November, Predicts Rate Hike in 2022

(Adds comments from Mester)

September 24 (Reuters) – The Federal Reserve is expected to start reducing support for the economy in November and could start raising interest rates by the end of next year if labor markets continue to weaken improve as expected, said Loretta Mester, Federal Reserve Chairman of Cleveland on Friday. .

The Fed has pledged to continue buying $ 120 billion in assets each month until the economy has made “further substantial progress” towards the Fed’s targets of maximum employment and inflation. 2%.

“In my opinion, the economy has met these conditions and I support the start of the reduction in our purchases in November and their conclusion in the first half of next year,” Mester said at an event hosted by the Ohio Bankers League.

The economy has also “largely” hit the Fed’s bar to raise interest rates, but “the economy is still quite a ways away from peak employment,” said Mester, who will become a voter next year at on the Fed’s policy-making committee. Still, she added, she expects the conditions to raise interest rates to be met by the end of 2022.

Responding to questions after his remarks, Mester said monetary policy will remain accommodative even after the Fed slows the pace of its asset purchases, as it will always increase the balance sheet. Mester said the virus continued to affect the economy and add uncertainty to forecasts, but each “wave” has a smaller impact on economic activity.

The policymaker is also monitoring the “foam” in the real estate and stock markets, which she says are not in bubble territory.

“There are different things going on that will affect the forecast, but I think it’s a baseline scenario that we’re going to have growth and the recovery is going to continue,” she said. (Reporting by Ann Saphir in Berkeley, California, and Jonnelle Marte in New York Editing by Chizu Nomiyama and Matthew Lewis)

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