Fed doesn’t set policy in global vacuum: Mester

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FILE PHOTO: Cleveland Federal Reserve Bank President Loretta Mester poses during an interview on the sidelines of the American Economic Association’s annual meeting in San Diego

(Reuters) – The Federal Reserve takes into account global factors like the strength of the dollar as it sets interest rates, though it ultimately makes policy decisions based on domestic goals, Cleveland Fed President Loretta Mester said on Monday.

“We’ve seen what’s going on in financial markets. … The mechanism will be through the financial markets, and whether they are functioning or not,” Mester said on a day of heightened financial market volatility that included a steep drop in the value of the pound. “We are going to set monetary policy that’s appropriate for the U.S. economy, but we don’t set it in a vacuum thinking that we are an independent island and we are not connected to the rest of the world.”

(Reporting by Ann Saphir; Editing by Mark Porter)