Fed’s Mester: There does not seem to be much support for using negative rates in the US

Loretta Mester, President and CEO of the Federal Reserve Bank of Cleveland, crossed wires during the early Thursday morning in Asia. Although her initial comments cited the US economic weakness, answers to the audience show the Federal Reserve (Fed) is away from the negative rate.

Key quotes

High-frequency data and discussions with regional contacts indicate US economic activity slowed in recent weeks.

US reopening phase proved to be challenging and may be more protracted than many anticipated.

Decline in economic activity has put downward pressure on inflation.

Forward guidance on the path of policy, asset purchases can provide further accommodation while rates at effective lower bound.

Expects unemployment rate to remain elevated at around 9% by end 2020, economic output to fall by 6% from the end of 2019.

There does not seem to be much support for using negative rates in the US.

The US is going to need much more fiscal support.

Forward guidance is a tool she will keep in her kit for when the time is right.

Still hopeful that congress will pass a fiscal stimulus bill because the need is out there.

Uncertainty around unemployment benefits and aid to businesses is a risk to the economic forecast.

Market reaction

Such comments from the Fed policymaker favor the market sentiment and helps risk barometers like AUD/USD to remain afloat.