(Reuters) – The U.S. Federal Reserve’s new framework for setting monetary policy makes it clear that a strong labor market on its own is not cause for concern unless there are signs of inflation or financial stability risks, Cleveland Fed Bank President Loretta Mester said Wednesday.
The U.S. central bank last week announced a sweeping overhaul of its monetary policy strategy, adapting it in an environment where interest rates are expected to stay low. The shift puts more focus on shortfalls in employment and allows for slightly higher inflation.
“The new statement language clarifies that in the absence of inflationary pressures or risks to financial stability, strong employment is not a concern and monetary policy will not react to it,” Mester said in remarks prepared for a webinar.
The strategy makes it clear that since inflation has been running below the central bank’s 2% target, Fed officials will now “likely set policy with the intention to move inflation moderately above 2 percent for some time,” Mester said.
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