Fed’s Mester: Fed will need to hike rates above 5% and hold them there for a while

“Federal Reserve will need to hike rates above 5% and hold them there for a while,” said Federal Reserve Bank of Cleveland leader Loretta Mester late Tuesday.

The policymaker also stated that the recent bank tighter credit may result from turmoil.

Additional comments

Tightening monetary policy needed to cool too hot inflation.

How much more the fed hikes depends on economy and how it reacts.

Tighter financial conditions should create restraint on economy.

Banking sector resilient, stresses appear to have eased since last month.

Fed balance sheet cuts aiding rate-hike cycle.

Fed closely watching banking system for signs of stress.

Expects inflation to ease to 3.75% by end of year, 2% by 2025.

Expects growth to moderate this year.

Expects jobless rate to rise to between 4.5% and 4.75% this year.

Market implications

The news might have allowed the US Dollar bears to take a breather at the lowest levels in two months, making rounds to 101.50 by the press time.

Also read: Forex Today: Dollar under pressure, Gold jumps and US yields tumble