With the U.S. economy showing momentum and low inflation not a concern, the Federal Reserve should raise short-tem interest rates before the end of June, said Loretta Mester, the president of the Cleveland Fed, on Wednesday. "I would be comfortable with liftoff in the first half of this year," Mester said in a speech to bankers in Columbus, Ohio. Mester said she expects the economy to grow at a 3% pace in 2015 and 2016. Inflation should gradually move back to the Fed's 2% annual target rate by the end of 2016, Mester said. The Cleveland Fed president is not a voting member of the Fed's policy panel this year. She said that lower oil prices will turn out to be a "net positive" for the economy and that growth should stay strong despite lower exports. Mester said that financial market measures of inflation expectations are skewed by highly volatile financial markets and flight-to-quality flows into U.S. securities. "Altogether...my read is that inflation expectations remain anchored," Mester said.
Copyright © 2015 MarketWatch, Inc.