Mester's `Good Spot' for Fed Affirmed as U.S. Job Growth Surges

(Bloomberg) -- The president of the Federal Reserve Bank of Cleveland said the central bank is in a “good spot” with monetary policy and the U.S. economy, a view that was affirmed minutes later when a government report showed stronger-than-expected job and wage growth in December.

Speaking Friday in an interview on CNBC before the Labor Department figures were released at 8:30 a.m. in Washington, Loretta Mester defended the Fed’s interest-rate hike last month amid falling stock prices and weaker oil prices. She said the central bank sets monetary policy based on where the economy is headed. Mester does not vote on Fed policy this year.

Nonfarm payrolls jumped by 312,000 in December, more than any estimate in a Bloomberg survey of economists. The median forecast was for a gain of 184,000. The unemployment rate rose to 3.9 percent as labor-force participation increased. Average hourly earnings rose 3.2 percent from a year earlier, matching the fastest pace since 2009.

The report may serve as vindication for central bank officials who’ve come under criticism from President Donald Trump for increasing borrowing costs at a time when the economy shows signs of softening. The Fed has been raising rates gradually to prevent the economy from overheating.

In the interview before the jobs report was released, Mester said the Fed is neither ahead of or behind the curve, calling the current situation facing the Fed a “good spot” to be in to assess where the economy goes from here.

“I don’t feel an urgency to increase rates from where we are now because I see an impending inflation problem. I don’t see that in the data,” she said. “I do think that, you know, we have to take into account that financial market conditions have tightened.”

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