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Fed's Mester says monetary and fiscal support needed to avoid lasting economic damage

Kitco News

(Reuters) - The U.S. economy will continue to require support from both monetary and fiscal policy as it recovers from the crisis caused by the pandemic and overcomes the challenges caused by a surge in infections, Cleveland Federal Reserve Bank President Loretta Mester said Tuesday.

“Both monetary and fiscal policy have supported the recovery in the U.S. thus far, and in my view, both will continue to be needed to limit lasting damage to the economy from the pandemic,” Mester said in remarks prepared for an event organized by the European Economics and Financial Centre.

The arrival of effective vaccinations and some stronger than expected improvements suggest the economy is more resilient than initially thought, Mester said.

She repeated her view that no changes to monetary policy will be needed if the economy slows down in the first half of the year and then rebounds in the second half of the year, as expected.

But she also noted that the economic outlook remains highly uncertain and said policymakers stand ready to adjust policy if the outcome is either worse, or better, than expected.

“In either case, consistent with our forward guidance, Federal Reserve policymakers stand prepared to respond appropriately to continue to foster a broad-based sustainable recovery,” Mester said.

Reporting by Jonnelle Marte; Editing by Chizu Nomiyama

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