Fed’s Mester: Undertightening would be worse than overtightening

Loretta J. Mester, president of the Federal Reserve Bank of Cleveland said on Friday in an interview with Bloomberg, that they need to see a moderation in the labor market and wage growth. She mentioned they are not seeing evidence of a wage-price spiral but added, “inflation is still too high”. 

“I have a base case of soft landing”, explained Mester. She warned that under-tightening would be worse than overtightening. 

Market reaction

The US Dollar is pulling back in the market after rising in response to Fed Chair Powell's speech. The US Dollar Index (DXY) is currently trading marginally higher around 104.05, although it is far from the monthly high it reached earlier on Friday at 104.44.