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Fed's Mester: US hitting inflation target; more rate hikes this year

Federal Reserve Bank of Cleveland President Loretta Mester projected inflation may hit the Fed's long-run target by next year.

"I believe the conditions are in place for a sustained return over the next year or so to our symmetric goal of 2% inflation," Mester said during a March 30 speech in Chicago.

In the same speech, Mester also discussed gradually removing monetary policy accommodations to "help prolong the expansion, not curtail it." She said this removal means increasing the fed funds rate at a faster pace than usual.

"My current assessment is that the pace of [monetary accommodation] removal won't call for an increase in the fed funds rate at each meeting," Mester said, "but it does mean more than the one-increase-per-year seen in the past two years."

The Cleveland Fed chief also said she would support ending the bank's balance sheet reinvestment policy this year if the economy continues to grow.

"Ending reinvestments is a first step toward reducing the size of the balance sheet and returning its composition to primarily Treasury securities over time — a welcome acknowledgment that the economy and policy are transitioning back to normal," she said.

Mester told the audience during her prepared remarks that "the underlying fundamentals supporting the economic expansion are sound," and added that any weakness in first-quarter growth would likely be the result of transitory influences and seasonality.