Fed's Mester states that inflation expectations are stable and that the economy is "balanced" By Reuters

SAN FRANCISCO (Reuters) – The Federal Reserve has not lost credibility in its promise to keep inflation at around 2%, despite the recent decline in the pace of price hikes and the long-running deficit. date of its goal, said Cleveland Federal Reserve Bank President Loretta Mester on Friday.

Expectations of inflation, she says, remain stable and show no sign that companies or households have lost hope that the Fed will let inflation drop, she said, possibly rebutting. to be the main argument of policy makers who believe that interest rates should be soon reduced.

"I do not see much evidence that inflation expectations are down – they have been relatively stable," she said in an interview with Reuters at a news conference. Monetary Policy. "I do not see a convincing case of loss of credibility of the goal of inflation".

Mester said she felt the future prospects for economic growth of 2 to 2.5% posed risks, and as job growth continued, it did not seem there have reason to consider raising or lowering rates.

The recent performance of the economy "tells us in a way that we are in a balance – there is no compelling reason to change, far from where we are," she said. .

Earlier this week, the Fed kept interest rates in the current range of 2.25% to 2.5%. Investors were expecting a signal that the Fed could cut rates in the coming months after new data showed that inflation, free of food price volatility and price volatility. energy, hovering around 1.6%, below the Fed's 2% target.

That's pretty much the same since the Fed set this goal of 2% in 2012, although the economy has recovered from a good chunk of the severe recession from 2007 to 2009 and that the unemployment rate was high.

The Fed was close to its goal for much of last year.

Mester said he does not expect the recent drop in inflation to be sustainable and thinks the Fed should not respond, a view shared by senior officials, including the Fed chairman, Jerome Powell, and Vice President, Richard Clarida. Some of his colleagues have suggested to the Fed that they need to lower rates to show that they really want to reach the 2% target or risk compromising their credibility.

"I'm not one of those who say," Oh, we got a reading of 1.6 and we have to do something about it, "she said.