(Reuters) -The U.S. economic outlook is brightening, Cleveland Federal Reserve Bank President Loretta Mester said on Monday, adding that the Federal Reserve should stick to its easy monetary policy to help support growth further.
"I'm thinking that we'll see a very strong second half of the year, but we are still far from our policy goals," Mester said in an interview on CNBC, referring to the Fed's goals of full employment and 2% inflation.
Though it was "nice to see" the government's report published on Friday showing U.S. employers added 916,000 jobs in March, the most in seven months, the economy remains nearly 8.5 million jobs short of employment levels in February 2020, she said.
"We need more of those kind of job reports coming out to actually make more progress than we've seen thus far," she said. "I think we need to be very deliberately patient in our approach to monetary policy."
The remarks from one of the Fed's historically more hawkish policymakers are a reminder that the Fed is operating under a very different framework from the last time the economy was emerging from a recession.
Under the old framework, the Fed aimed to tighten policy to head off inflation before it arose, a strategy now seen as needlessly liable to choke off recovery prematurely, given how sluggish inflation has proven to be in recent decades.
Under the new framework, adopted last August, the Fed has promised to keep interest rates at their current near-zero level until the economy reaches full employment and inflation hits 2% and is on track to exceed that goal for some time.
It has also said it will continue to buy bonds at a monthly pace of $120 billion until there is "substantial further progress" on both goals.
"We just need to see more progress, and we need to see more of those kind of good numbers coming our way," Mester said, referring to the March jobs report.
She said she expects higher inflation readings over coming months, but - based on conversations with business leaders who do not feel they can pass on higher costs to customers - those price increases "are not going to be sustained."
As for the recent rise in bond yields that some worry could hurt the Fed's efforts to boost the economy, Mester said she is "not concerned." Noting the increase has not been disorderly and reflects the better economic outlook, she said, "I don't think there's anything for the Fed to react to."