Cleveland Fed's Mester Said to Be Considered for Vice Chair
Loretta Mester, president of the Federal Reserve Bank of Cleveland, speaks during the Athena Center For Leadership Studies event at Barnard College in New York. (Photographer: Mark Kauzlarich/Bloomberg)

Cleveland Fed's Mester Said to Be Considered for Vice Chair

(Bloomberg) -- The White House is considering Federal Reserve Bank of Cleveland President Loretta Mester as it reviews candidates to be the central bank’s vice chair, according to a person familiar with the matter.

The person, who discussed the situation on the condition of anonymity, said Mester impressed the selection team, but said there was currently no front-runner for the post of No. 2 to Fed Chairman Jerome Powell, who took the central bank’s helm on Feb. 5. He replaced Janet Yellen, the first woman to hold the top job.

The Trump administration has for weeks been searching for someone to replace Stanley Fischer, who stepped down as vice chairman in October. San Francisco Fed President John Williams and Mohamed El-Erian, chief economic adviser at Allianz SE, have also been considered by the White House.

Mester’s candidacy was reported earlier Tuesday by The Wall Street Journal, which also said Pacific Investment Management Co.’s Richard Clarida had been interviewed. The president’s nominees to the Fed Board are subject to Senate confirmation.

Lawrence Lindsey, a former Fed governor who is now an economic consultant, said Feb. 5 he’d withdrawn his name from consideration.

Mildly Hawkish

Mester, 59, is known for her mildly hawkish views on monetary policy. In 2017, she argued for four interest-rate hikes when the Federal Open Market Committee lifted rates three times.

She repeated her view Tuesday that the Fed should continue to hike rates gradually this year, “at a pace similar to last year’s.” She also noted that recent tax cuts had added upside risks to her outlook for the U.S. economy.

Mester served on a communications subcommittee under former Fed Chair Janet Yellen, and supported the Fed’s next step of putting bands or confidence intervals around its quarterly economic projections to show a range of possible outcomes. She has also advocated for “systematic” or predictable policy. That stance will echo well with Republican lawmakers who would like to see less discretion in U.S. monetary policy. 

“When policy makers strive to be systematic in their policy responses to changes in economic conditions that influence the outlook, the public will have a better idea of how monetary policy is likely to change as economic conditions evolve,” she said in a speech last month.

A native of Baltimore, Mester has led the Cleveland Fed since 2014 after serving 14 years as the director of research at the Philadelphia Fed. She earned a Ph.D. in economics from Princeton University in 1985.

The vice chairman plays a critical support role for the central bank’s leader, and often heads special projects at the request of the chair. Along with the president of the New York Fed, who acts as the central bank’s eyes and ears on Wall Street, the deputy typically forms a key voting bloc with the chairman on both policy and strategy.

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