Fed's Mester says monetary policy will remain accommodative for 'quite some time'

FILE PHOTO: Cleveland Federal Reserve Bank President Loretta Mester poses during an interview on the sidelines of the American Economic Association’s annual meeting in San Diego, California, U.S., January 3, 2020. REUTERS/ Ann Saphir

(Reuters) – U.S. economic growth could surge later this year if most Americans are vaccinated against the coronavirus, but the gains would unlikely be enough for the Federal Reserve to pull back its support, Cleveland Fed President Loretta Mester said on Monday.

Even if the vaccines help people feel safe doing certain activities, the economy would likely remain far from the Fed’s goals for inflation and full employment, Mester said.

“Monetary policy will need to remain highly accommodative for quite some time because achieving our monetary policy goals is likely to be a journey and not a sprint,” Mester said during remarks prepared for the annual meeting of the Allied Social Science Associations, which is being held virtually this year.

The policymaker said the recovery is likely to remain uneven, with some sectors recovering more quickly than others. Some workers will struggle to find new jobs and may need help training for new roles, she said. And inflation is not likely to “move up quickly above” the Fed’s 2% target, she said.

Fed officials agreed at their December meeting to keep interest rates near zero and to continue purchasing about $120 billion a month in government bonds.

Mester added that the Fed would adjust policy if the economy improves more rapidly than expected.

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