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Cleveland Fed President Loretta Mester repeated that the U.S.
economic outlook is as strong as it has been "in a long time."
But that does not mean that little-tested, so-called
countercyclical standards, which would raise requirements on
banks during good times and ahead of a downturn, should be
tightened.
Instead, existing capital and liquidity standards should be set
"somewhat higher than they would be if we had more experience
with and confidence in the countercyclical tools," Mester said.
"It would be a mistake to unwind the steps taken since the
financial crisis that have led to a more resilient financial
system," she added in remarks prepared for delivery at the
European Central Bank in Frankfurt. "I would like to see how the
new settings perform throughout the cycle before making major
changes."
The Trump administration and the Republican-controlled Congress
have rolled back some financial regulations in an effort to free
up capital, in an aim to boost economic growth. The Fed's
leadership has taken a more measured approach, though it has
moved to trim some capital requirements, and restrictions on
small lenders.
The Fed has raised rates six times since late 2015 in a nod to
low unemployment and below-target inflation. Mester, who backs
the gradual hikes, said more aggressive tightening is a possible
defense against any rising financial stability risks if such
restrictions on banks proved inadequate.
(Reporting by Francesco Canepa; Writing by Jonathan Spicer;
Editing by Leslie Adler)
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