Federal Reserve Bank of Cleveland President Loretta Mester spoke on "An update from the Federal Reserve” on Wednesday. Mester said that inflation is higher than expected and the US Fed needs more confidence in trajectory.
Key quotes
“More information needed before confirming 2% inflation sustainability.”
“Inflation slightly higher than anticipated this year.”
“Confidence needed that inflation is decreasing.”
“Strong labor markets, solid economic growth.”
“Watching and gathering more information before taking action.”
“Monetary policy well-positioned.”
“Possible rate cut if labor markets worsen.”
“Anticipates a shift to eased policy.”
“Watching risks to both mandates.”
Market reaction
The US Dollar Index (DXY) is trading 0.02% lower on the day at 105.92, as of writing.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD deflates to three-day lows around 1.1130
The euro remains under heavy pressure on Friday, with EUR/USD retreating toward the 1.1130 level to hit new three-day troughs. Despite a weaker reading in the U-Mich index in May, the US Dollar found support as inflation expectations ticked higher.
GBP/USD slips back to 1.3250 on USD-buying
GBP/USD recedes to the mid-1.3200s on Friday session, as the Greenback regains ground against the broadeer risk-linked universe. Supporting the upside in the US Dollar comes a rise in US consumer inflation expectations, according to the latest data from the U-Mich survey.
Gold looks depressed below $3,200
Gold reversed course on Friday, falling sharply below the $3,200 mark after Thursday’s strong rally. The retreat came as a resurgent US Dollar and easing geopolitical tensions weighed on demand for the safe-haven metal. Furthermore, XAU/USD remained under pressure and is on track to log its biggest weekly loss of the year.
Is Ethereum's comeback real?
Ethereum price hovers above $2,500 on Friday after soaring nearly 100% since early April's bottom. The ETH Pectra upgrade has boosted over 11,000 EIP-7702 authorizations in a week, indicating healthy uptake by wallets and dApps.
Trump’s Middle East dealmaking blitz: What does it mean for investors?
President Donald Trump’s May 2025 Middle East visit has unleashed a flurry of mega-deals, aimed at deepening U.S. trade ties, correcting trade imbalances, and reinforcing America’s leadership in defense and technology exports.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.