Mester: Brexit Poses Risks to U.S. but Fed Still on Track

Britain's vote last week to leave the European Union poses a risk to the U.S. economy but it is too early to know the extent of that effect and the Federal Reserve should not let a lack of clarity distract it from is plan to eventually raise interest rates, a top Fed official said on Friday.

Cleveland Fed President Loretta Mester said gradual rate hikes remained the appropriate plan when U.S. central bankers held their regular meeting last month, though it was prudent to wait given the upcoming UK referendum on so-called "Brexit."

"How it plays out will ultimately determine its implications for the global economy and monetary policy," she said in a London speech. "For the U.S. economy, while the risks and uncertainty surrounding the outlook have increased, it is too early to judge whether conditions in the aftermath of the decision will necessitate a material change in the modal outlook."

While Fed policy is not yet behind the curve, "policymakers cannot let the lack of economic clarity distract us from our important mission," added Mester, a relatively hawkish official who has a vote on the Fed's monetary policy committee this year.

"Waiting too long increases risks to financial stability and raises the chance that we would have to move more aggressively in the future, which poses its own set of risks to the outlook," she said, painting a mostly upbeat picture of U.S. economic prospects. (Reporting by Marc Jones and Andy Bruce; Writing by Jonathan Spicer; Editing by Chizu Nomiyama)