Loretta Mester, president and CEO of the Federal Reserve Bank of Cleveland.
David Paul Morris | Bloomberg | Getty Images
March’s strong job gains were not enough to convince President Cleveland Federal Reserve Loretta Mester that it’s time to change monetary policy.
The central bank official told CNBC on Monday that she welcomed the news that non-farming salaries had risen 916,000 for the month, thanks to an increase in leisure and hospitality work, as well as a boost in government and construction .
However, the Fed remains committed to keeping rates low until the employment picture brightens significantly, she added.
“I think we’ll see a very strong second half of the year, but we’re still far from our policy goals,” Mester said in a Closing Bell interview. “It was great to see the report. We need more of them to come our way. ‘
In addition to the large increase in jobs, the unemployment rate also dropped to 6%, the lowest of the Covid-19 pandemic.
The Fed remains committed to ultra-loose policies until the labor market not only finds full employment again, but also sees inclusive gains across incomes, races, and gender boundaries. Central bank officials have also promised to tolerate inflation slightly higher than their long-term target of 2%, if it is in the interest of restoring the economy.
Parts of the financial markets have expressed concern about potential inflationary effects of the Fed’s loose policy, as well as trillions of spending on government.
But Mester said she is largely not worried about the yield on government bonds this year. The 10-year treasury bond recently traded about 1.71%, almost the highest level since the pandemic.
“I think the higher yield on bonds is very understandable in the context of the improvement in the economic outlook. The increase was an orderly increase,” Mester said. “So at this point I’m not worried about the rise in yields. I do not think there is anything the Fed is reacting to.”