Federal Reserve Bank of Cleveland president Loretta Mester said the coronavirus poses a risk to the global economy, but that hasn’t changed her forecast for continued growth of about 2% in the U.S. this year.

“I’m thinking about it as a risk,” Mester said at a Forum of Executive Women event at Saul Ewing law firm in Center City on Wednesday. The SARS epidemic "in 2003 is what economists are looking at” as a map for impact, but China today boasts a much bigger economy than during the last epidemic.

“The Chinese economy in the first quarter will see a drop," Mester said. “It will have some dampening effect on the global economy,” but the full magnitude is unclear, she said. “We’re assessing what the impact could be on the U.S. economy,” but "I haven’t marked down my forecast because of it.”

Also, she maintained, the Fed doesn’t pay attention to Twitter, the favored medium of current President Donald Trump.

“We are not a partisan group at all. We really pride ourselves" on remaining above politics and not conceding to pressure from politicians, Mester said.

On inflation, “we’re running a little below 2% in terms of PCE [Personal Consumption Expenditures] inflation rate," Mester said. “It won’t be sustainably at 2% until a year" or longer.

“It’s a slow move up, it’s not going to be imminent.”

Negative interest rates: ‘Not a fan’

If investors buy a 10-year German bond today for $10,000 and wait 10 years, they’ll get back slightly less than $10,000 -- a phenomenon known as negative interest rates.

Could that happen in the U.S.? Currently, short-term interest rates set by the Fed total about 1.5%.

“The European economies are in different places," Mester said. "They’re weaker than the U.S. That said, there has been a worldwide decline in the level of interest rates. Demographics suggest people are more risk averse.”

During the financial crisis, “we did not bring our interest rate to negative numbers."

The Fed opted to buy Treasuries and mortgage-backed securities instead during the 2008 recession.

“That had some positive impact. Also, we made forward guidance, and told people interest rates are low now, and we intend to keep them low,” she said.

Mester has longtime Philadelphia ties: She worked as research director at the Philadelphia Fed from 2000 to 2014, when she became president of the Cleveland Fed. She is an adjunct professor at Wharton.

Income Inequality

Philadelphia is the sixth largest city in the country, but the third-worst city for income inequality behind Atlanta and New Orleans, noted Lara Rhame, chief economist at FS Investments, who interviewed Mester at the event.

“We’re trying to bring together parties who can do public-private partnerships. One thing that’s loud and clear, it’s all great to have jobs, but there’s a lot of challenges,” Mester said. “Simple things like transportation and health care. Some people have to take off work because they can’t afford child care. There are pockets of things that are barriers to entering the workforce.”

The Philly economic region doesn’t have as much exposure to trade and manufacturing as the Cleveland area.

“Labor is very strong. Wages are going up, and prices aren’t going up. Those labor market pieces are very similar across the country.”

Keeping women in economics

At the Cleveland Fed, “we’re focusing on” bringing more women into economics, particularly at the central bank upper levels. “The American Economic Association has been championing more women" by increasing the pipeline of women coming out of undergraduate economics programs and retaining them in doctoral programs.

“If you have more diversity in house, you get better results” in profitability and share price, Mester said.

“There are lots of traditional organizations that are doing incredible work, whether banks or corporations. We have a retention piece; we’re good at hiring, but then we can’t retain. So the team has a monetary incentive. That shows we’re serious” about hiring diverse candidates.

Women in college are more deterred by low grades in introductory courses than men are, she noted.