Cleveland Federal Reserve Chairman Loretta Mester has outlined an aggressive plan to cut easy money policies this year, saying the central bank will be ready to raise interest rates at every meeting and must work to remove mortgaged securities. hold.

“Every meeting will be in play,” Mester said Wednesday at a virtual event hosted by the European Economic and Financial Center. “We will assess the conditions, we will assess how the economy is developing, we will look at the risks and we will eliminate accommodation.”

Her comments come with markets expecting the Fed to raise its benchmark interest rate on short-term loans at its March meeting. Traders anticipate at least four more price increases during the year.

Mester said he saw an increase in March recently, but did not expect to raise interest rates by more than 25 basis points, or a quarter of a percentage point, as the norm. But she was adamant that it was time for the central bank to begin reversing the historically adaptive measures it had taken during the Covid pandemic crisis.

“I don’t like to take anything from the table,” she said. “I don’t think there is a convincing argument to start with 50 basis points [increase]. Again, we need to be a little careful. Although you can well telegraph what lies ahead, when you take this first action, there will be a reaction. “

Mester is a voting member this year of the Federal Open Market Committee, which sets interest rates and other monetary policy measures. She noted that she would closely monitor inflation. If it falls during the year, it would lead to fewer interest rate hikes, while an acceleration would trigger more ingenious action.

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Another big question for the Fed this year is how it will start reducing its bond portfolio, which it has acquired through monthly purchases. The central bank’s total balance sheet is nearly $ 9 trillion, doubling during the pandemic.

The Fed is likely to allow some of its assets to decline each month while reinvesting the rest. However, Mester advocated a more proactive approach, with the Fed selling directly $ 2.66 trillion in mortgage-backed securities.

In the last balance reduction, which lasted from 2017 to 2019, he used a passive reduction.

Like other officials, Mester noted that conditions are different this time around: holdings are far larger and the economy is in a stronger position, so reducing the balance sheet can be done faster.

She called on the central bank to give up its mortgage assets and focus on the financial market.

“I think it’s important that the Fed doesn’t distribute its credit to certain sectors,” Mester said.

The Fed’s monthly purchases of assets have been reduced to $ 60 billion and are expected to be completed by March. The opinion of the market is united around the reduction of the balance, which starts in the summer.

Earlier in the day, Atlanta Fed President Rafael Bostic also called for several interest rate hikes this year and a rapid reduction in the balance.