By Michael S. Derby 

Federal Reserve Bank of Cleveland leader Loretta Mester said that when it comes to the formal opposition she offered to the full scope of the central bank's last interest-rate cut, "I don't regret it."

"A low interest rate doesn't transmit into the economy if financial markets aren't functioning well" and at the time the central bank lowered rates earlier in March, markets were in trouble, Ms. Mester said Tuesday..

"To have monetary policy and an interest-rate cut actually do good, right, you need to have the transmission mechanism of that policy through the economy actually working, so that was my focus," Ms. Mester said, noting that she fully supported actions the central bank took then to bolster financial markets.

In the current situation, where economic activity has cratered as the nation and global economy shuts down many of its sectors to help limit coronavirus risks, a rate cut "has less bang for the buck" because it can't help stimulate economic activity.

Ms. Mester was interviewed on the CNBC television channel. The veteran central banker was the only voting member of the rate-setting Federal Open Market Committee to oppose the central bank's emergency rate cut on March 16. Then, the central bank slashed its short-term rate target to near zero levels and launched expanded asset buying, as well as other efforts to help bolster credit and support the financial system.

Ms. Mester said at the time she supported Fed efforts to aid markets and she was on board for lower rates but preferred a smaller move than her colleagues wanted. In a statement on March 17, she said a smaller move could have "preserved the option" of further cuts "for a time when market functioning had improved and such an action could be expected to be most effective in supporting the economy."

Ms. Mester in the interview said Fed actions have helped restore a lot of market functioning. She also said that whatever happens with the economy at this point will be driven by the decisions of public-health officials.

She said she is bracing for some really bad economic numbers as a result of the shutdown and said the jobless rate will almost certainly exceed 10% -- it was at 3.5% in February -- but is unlikely to go as high as 30%.

"I expect to see some very bad numbers coming out of the economy in the first quarter, second quarter, and then what it looks like coming out of that, it's going to really depend" on the health-care response, Ms. Mester said.

Write to Michael S. Derby at michael.derby@wsj.com

(END) Dow Jones Newswires

March 31, 2020 18:14 ET (22:14 GMT)

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