Fed’s Mester: Omicron threatens to stoke US inflation

Dhwani Mehta FXStreet

In an interview with the Financial Times (FT), Cleveland Fed President Loretta Mester delivers hawkish comments on likely rates next year while cautioning about the risks from the Omicron covid variant.

Key quotes

Omicron threatens to stoke US inflation.

Variant could exacerbate supply chain crunch and worker shortages.

The fear of the virus is still one of the factors holding people back from re-entering the labor force.

Have to entertain the risk that those persistently high numbers of inflation could become more embedded.

The economy is better at dealing with these variants.

The demand side effects have been lessened, but we’ve seen these supply-side effects, which are related to the virus.

Would support at least one rate increase next year, and that two might be “appropriate”.

Market reaction

These above comments had little to no impact on the US dollar, as it trades flat at 96.16 against its major rivals, at the time of writing. Markets await the US NFP for a fresh trading direction.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.