(Bloomberg) — Federal Reserve Bank of Cleveland President Loretta Mester said fiscal policy support, not additional monetary-policy action, is what the U.S. needs most as surging Covid-19 infection rates threaten to smother economic activity.
“The virus case increase is very concerning and the fact that we don’t have a fiscal package is very concerning,” Mester said Thursday in an interview with on Bloomberg Television with Michael McKee and Jonathan Ferro (NYSE:).
Mester, a voter this year on the rate-setting Federal Open Market Committee, noted that some sectors of the economy are doing fine while others remain severely damaged.
“With the disparate impact, that’s where fiscal policy plays a role because fiscal policy can be really targeted,” she said, whereas monetary policy is a much more blunt tool for stimulating the economy. “We’re in a good place with our monetary policy because we are very accommodative.”
At its Nov. 4-5 meeting, the FOMC discussed its options for altering large-scale asset purchases as a way to further lower borrowing costs for businesses and households. The Fed is currently buying about $120 billion in Treasuries and mortgage-backed bonds every month, partly aimed at lowering borrowing costs for businesses and households. The Fed’s next meeting is Dec. 15-16.
Asked if she supported a move to adjust or increase the purchases, Mester was noncommittal but didn’t lean in favor of a change.
“It’s not clear to me that monetary policy necessarily is the right tool,” she said. “To my mind when you have such disparity across sectors it’s the fiscal policy that’s the right tool to address those things.”
That bodes poorly for the economy because Congress does not appear poised to act, she added.
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