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Fed's Mester says government should help workers hurt by trade

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Federal Reserve Bank of Cleveland President Loretta Mester said the government should do more to soften the blows to US workers from trade agreements and technological changes that destroy jobs.

[WASHINGTON] Federal Reserve Bank of Cleveland President Loretta Mester said the government should do more to soften the blows to US workers from trade agreements and technological changes that destroy jobs.

"We know free trade is good for the economy overall, but how you get there and the distributional effects matter," Ms Mester told reporters after a speech on Wednesday in Cleveland.

"I do think it behooves us to think hard about what are the programs that help. I don't think we can ignore the transition."

Free trade has become a contentious issue in the US presidential election with populist candidates like Republican Donald Trump and Democrat Bernie Sanders bashing trade agreements as job killers in America.

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"I don't know whether it's worse now, but I think there's more awareness of it," Ms Mester said, referring to the need for government intervention to support workers.

"People were suffering 10 years ago, but we weren't as aware of it."

Many economists have backed trade agreements because they lower the cost of goods for consumers and create export opportunities for domestic companies. Those benefits are widely seen to outweigh the impact on the economy of job losses as manufacturers lose out to imports or move production outside the US.

On monetary policy, Ms Mester said it will be appropriate to gradually reduce accommodation and that the Fed isn't behind the curve. Economic growth will probably rebound in the second quarter after a weak first quarter and reach a "moderate" pace of 2.25 per cent to 2.5 per cent this year, while inflation is expected to remain low before accelerating to 2 per cent over a couple years, she said.

Ms Mester, a voting member of the Federal Open Market Committee this year, repeated that she expects more rate increases this year after the bank raised interest rates in December for the first time since 2006.

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