Loretta Mester, president and CEO of the Cleveland Federal Reserve Bank.
David Paul Morris | Bloomberg | Getty Images
March’s strong earnings were not enough to convince Cleveland Federal Reserve Chair Loretta Mester that it is time to change monetary policy.
The central bank official told CNBC on Monday that she welcomed the news that non-farm payrolls had risen 916,000 for the month, thanks to an increase in leisure and hospitality occupations, as well as a jump in hiring of government and construction.
But the Fed remains committed to keeping rates low until the employment outlook clears considerably, he added.
“I’m thinking we’ll see a very strong second half of the year, but we’re still a long way from our political goals,” Mester said during a “Closing Bell” interview. “It was great to see this report. We need more to come out of it.”
In addition to the large employment gain, the unemployment rate also fell to 6%, the lowest in the Covid-19 pandemic era.
Still, the Fed remains tied to ultra-loose policy until the labor market not only returns to full employment, but also sees inclusive gains on the income, racial, and gender lines. Central bank officials also pledged to tolerate inflation that slightly exceeds their 2% long-term target if it is to get the economy back on track.
Parts of the financial markets have expressed concern about the possible inflationary effects of the Fed’s loose policy, as well as billions of government stimulus spending.
But Mester said he doesn’t care much about this year’s accumulation of government bond yields. The 10-year Treasury bill was recently trading at around 1.71%, near its highest level since before the pandemic.
“I think higher bond yields are quite understandable in the context of improving the economic outlook. The increase has been an orderly increase,” Mester said. “So I’m not worried right now about rising yields. I don’t think there’s anything the Fed is reacting to.”