Fed’s Rosengren: We still have a fairly large gap in employment to make up

“Fed needs to watch the data to see if inflation is more persistent than expected,” said Eric Rosengren is president and CEO of the Federal Reserve Bank of Boston, per Reuters.

The Fed policymaker also joined the chorus including Chairman Jerome Powell and Treasury Secretary Janet Yellen while saying, “most price increases will be reversed going into next year.” Fed’s Rosengren further added, “While there are elevated prices for many goods and services that will be more moderate in 2022.”

Additional key comments…

A robust recovery is underway.

Vaccination rates have occurred more rapidly than anticipated.

Economy is getting close to some estimates of full employment.

Many sectors of the economy are still suffering.

There are shortages of goods and services because economy opened up so quickly.

Some costs are repricing back to normal.

The Federal Reserve does not expect used car price to continue to rise at the same pace.

Sees inflation slightly higher than 2% in 2022.

In terms of employment we're still well below where we were pre-pandemic.

Fed will watch data and act if necessary.

It is surprising overall average hourly earnings are not higher.

We need to think about financial stability issues when there is a high degree of stimulus.

Fed has to worry about rising housing prices and a boom-bust scenario.

Not necessarily expecting a bust in home prices.

Inflation risks are heightened and fed should be attuned to those patterns.

Any forecasts expecting inflation above 3% next year are outliers.

FX implications

Fed’s Rosengren adds strength to the market’s strength in pushing back rate hike expectations and favor the risk barometers like AUD/USD to consolidate the previous week’s losses.

Read: AUD/USD keeps first weekly gains in three above 0.7550 amid risk-on mood