Markets and US central bank now on same page, Fed's Mester says

One of the US central bank´s top policymakers sounded a relatively hawkish note on interest rates, telling her audience she would welcome an interest rate hike at this point.

Speaking after a speech delivered overnight in Singapore, Minneapolis Federal Reserve bank president Loretta Mester reportedly said the US monetary authority had not "fallen behind the curve", although to delay tightening policy risked the Fed "falling behind the curve".

"I’d be comfortable with an increase in the Funds rate at this point, if the economy keeps going the way it’s going," Mester said.

"But no one on the Fed, I would say, is thinking of precipitously raising," she added.

"My outlook builds in a gradual increase in the [Fed] Funds rate over time. And I’m comfortable with that."

Mester also said financial markets and the Fed were now on the same page when pricing in rate hikes over 2017.

"[Markets and the Fed were now] thinking about the economy in the same way."

She also described the economy as on a "sound footing" and said the Federal Reserve had taken "extraordinary actions" beyond what is typically considered to be the normal conduct of monetary policy.

On a similar vein, the rate-setter also reportedly alluded to the temporary negative impact on inflation of the recent oil price 'shock' and US dollar strength.

The US Federal Reserve continued to expect a return to its policy of holding mostly US Treasuries on its balance sheet, instead of mortgage-backed debt, which might help guard against future calls for it to enter the "realm of fiscal policy".

Loretta Mester was not a vote-wielding member of the Federal Open Market Cmmittee in 2017, but rather an alternate member.

As of 1106 GMT euro/dollar was little changed, drifting lower by just 0.03% to 1.0618.