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.

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