Washington (awp/afp) – The situation in Ukraine adds to the “risks and uncertainties” surrounding the American economy, an official of the American central bank (Fed) said on Thursday, stressing that the evolution of the conflict could affect the rate at which the institution will reduce its support to the economy.
“Risks and uncertainties surround the outlook” for the U.S. economy, “including those engendered by the geopolitical events unfolding today,” said Loretta Mester, chair of the Fed’s Cleveland regional office. during an online speech at the University of Delaware.
“The implications of developments in Ukraine for the medium-term economic outlook in the United States will also be considered in determining the appropriate pace at which to remove support,” added this voting member of the monetary committee of the powerful. Federal Reserve.
Faced with inflation at its highest for 40 years in the United States, and which now threatens the economy, the Fed is preparing, at its next meeting, on March 15 and 16, to raise its key rates.
These have been, since March 2020, in the low range of 0 to 0.25%. The question now is whether rates will go up to 0.25-0.50%, or 0.50-0.75%, which would be an unusually sharp rise.
The pace “will have to be data-driven,” said Loretta Mester.
She also spoke of the reduction in the Fed’s balance sheet, inflated by two years of asset purchases that have allowed the economy to continue to function, and rates to remain low.
“With nearly $9 trillion in assets, the Fed’s balance sheet is now about double what it was before the pandemic,” the official said.
She recalled that “the last time the Fed undertook a process of reducing the size of its balance sheet was after the Great Recession” of 2008-2009, and that “the reduction process lasted almost two years “.
“Barring a major change in the economy, I’m in favor of us starting to reduce the size of the balance sheet soon and moving faster than we did last time,” she said. precise.
Several other Fed officials have recently expressed a similar view.
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