Investing.com - Eric Rosengren, president of the Boston Fed and Federal Reserve Bank of Cleveland President Loretta Mester in the U.S. noted the case for more rate hikes this year remains strong, arguing economic trends are on the upswing and risks are growing.
Speaking in Bali, Indonesia, on Wednesday Rosengren said the "sharp" rise in apartment prices in particular in the U.S. may signal financial instabilities that interest rates, which are only gradually rising, may not be able to contain.
"Because real estate holdings are widespread, and the monetary and macroprudential tools for handling valuation concerns are somewhat limited, I believe we must acknowledge that the commercial real estate sector has the
potential to amplify whatever problems may emerge when we at some point face an economic downturn," Rosengren said in prepared remarks for delivery to a banking supervision conference.
Meanwhile, Mester said on Tuesday that if the economic data holds up she supports the U.S. central bank taking steps that would begin to reduce its $4.5 trillion balance sheet and sees more than three rate hikes, higher than the Fed's overall median forecast.
"I actually built into my forecast more than three because I have the economy a bit stronger," she said, adding that three or more rate increases this year would put the Fed in "good shape." Mester is not a voter on the Fed's rate-setting committee this year but participates fully in deliberations.