Fed's Mester Says Rates Should Rise Gradually

The transcript discusses the potential for raising interest rates, considering the current economic growth, labor market improvements, and inflation trends. It highlights the need for a gradual increase in rates, acknowledging the possibility of errors in inflation models. The discussion also covers the neutral rate estimates and adjustments based on economic projections, emphasizing a cautious approach to monetary policy.

Why does the speaker believe it is necessary to gradually increase interest rates?

• Because the economy is growing too fast.

• To respond to a financial crisis.

• Due to sustainable economic growth and improving labor markets.

• To decrease inflation immediately.

What is the speaker's stance on the possibility of inflation models being incorrect?

• They completely disregard the possibility.

• They believe models are always accurate.

• They acknowledge the possibility and adjust projections accordingly.

• They think models should never be questioned.

How does the speaker suggest handling the risks associated with interest rate adjustments?

• By ignoring downside risks.

• By taking a prudent approach and weighing both upside and downside risks.

• By focusing only on the upside risks.

• By making rapid changes without considering evidence.

What is the estimated short-term neutral rate according to the speaker?

• Below zero in real terms.

• Above 3% in real terms.

• Around zero in real terms.

• Around 5% in real terms.

How has the speaker's estimate of the long-term neutral rate changed over time?

• It has been adjusted upwards recently.

• It has been adjusted upwards over time.

• It has been adjusted downwards over time.

• It has remained the same.