Loretta Mester, president and chief executive officer of the Federal Reserve Bank of Cleveland.
David Paul Morris | Bloomberg | Getty Images
The strong job gains in March were not enough to convince Cleveland Federal Reserve Chairman Loretta Mester that it is time to change monetary policy.
The central bank official told CNBC on Monday that he received the news that non-farm payrolls increased by 916,000 in the month, thanks to an increase in leisure and hospitality jobs, as well as a jump in government hiring. and construction.
But the Fed remains committed to keeping rates low until the employment picture improves considerably, she added.
“I am thinking that we will see a very strong second half of the year, but we are still far from our political goals,” Mester said during a “Closing Bell” interview. “It was great to see that report. We need more of them coming our way.”
In addition to the huge job gain, the unemployment rate has also dropped to 6%, the lowest of the Covid-19 pandemic era.
Still, the Fed remains tied to an ultra-flexible policy until the job market returns not only to full employment, but also to see inclusive gains in terms of income, race and gender. Central bank officials have also pledged to tolerate inflation just above its long-term target of 2% if it is in the interest of making the entire economy again.
Parts of the financial markets have expressed concern about the potential inflationary effects of the Fed’s loose policy, as well as trillions in government stimulus spending.
But Mester said he was not at all concerned about this year’s rise in government bond yields. The 10-year Treasury note was most recently traded at around 1.71%, close to its highest level since before the pandemic.
“I think the higher yields on the bonds are quite understandable in the context of improving economic prospects. The increase was an orderly increase,” said Mester. “So I am not concerned at the moment with rising yields. I don’t think there is anything the Fed can react to.”