CLEVELAND May 30 The Federal Reserve cannot
achieve full U.S. employment over the longer term without
stabilizing prices, incoming Fed policymaker Loretta Mester said
on Friday, stressing that clear communication will be key as the
central bank returns to a more normal policy stance.
Mester, who succeeds Sandra Pianalto as president of the
Cleveland Fed on Sunday, gave a speech that was careful not to
reveal her stance on monetary policy or the economic outlook.
Instead she challenged Fed researchers to help the central bank
better understand inflation.
"We cannot have full employment over the longer run without
price stability over the longer run," she said according to
prepared remarks to a conference at the Cleveland Fed.
"The more we understand inflation dynamics, the more we will
understand how inflation will respond to changes in monetary
policy," added Mester, who will immediately have a vote on the
Fed's policy committee. Such findings are relevant as the Fed
"returns to a more normal policy setting framework over time."
Mester is currently head of research at the Philadelphia Fed
whose president, Charles Plosser, is an outspoken hawk and
critic of Fed accommodation. Mester, however, has not staked out
such an extreme stance.
The central bank has said that, depending on inflation and
the labor market, it expects to start raising interest rates a
considerable time after it ends a stimulative bond-buying
program, which is set to end in the fall.
"I believe effective central bank communication is a crucial
area of further research, especially in today's environment when
monetary policymakers are relying on forward guidance on
interest rates as a primary policy tool," Mester said.
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)