Fed’s Mester: We've met test for taper

“The Federal Reserve should begin tapering its asset purchases soon, but the US central bank is not likely to raise interest rates in the near term,” said Cleveland Federal Reserve Bank President Loretta Mester during Wednesday’s interview with CNBC, per Reuters.

Fed’s Mester adds “The thought about raising interest rates is not a near-term consideration at all.”

Key quotes

A lot of the increase inflation is tied to COVID-19, whether it's to demand or supply.

As asset purchases wind down, will have time to assess inflation, employment.

Revised up inflation forecast for this year.

Expects bottlenecks to last longer than originally expected.

Will see inflation readings come back down next year.

If we don't see inflation coming down next year, will need to reassess.

Baseline forecast is for inflation to come down, but there are upside risks.

So far medium and longer run inflation expectations are consistent with 2% inflation goal.

Some house price increases are a covid effect; not a reason to change monetary policy.

We've met test for taper.

Fed policy is well-calibrated to outlook.

Very comfortable with where policy is right now.

Banking system is quite healthy.

Q3 GDP will be weaker than 1h, but still expect US GDP to grow 5% to 6% this year.

Market’s reaction

Given the lack of key catalysts and attention on equity rallies, traders paid little heed to the news.