Federal Reserve Harker: Does not support rate hikes, the Federal Reserve can continue to steadily reduce balance sheet

Cleveland Federal Reserve Chair Loretta Mester believes that during times of fiscal uncertainty, the Fed can continue to steadily reduce its balance sheet. She also pointed out that even if inflationary pressures do not recede quickly enough, she is not inclined to support a rate hike. Mester stated her "baseline preference" is for the Fed to continue shrinking its balance sheet while the government sorts out its spending plans and adjusts debt ceilings to meet borrowing needs. In an interview on Thursday, Mester said once fiscal paths are clear and if there's structural imbalance in market liquidity, temporary repurchase operations could be used "to re-inject liquidity into the system until market demand is understood." She also indicated that if inflation remains above a 2% target, she does not expect a rate increase but did not rule it out completely. However so far, "I believe (expectations) remain stable," she said.