Fed's Mester Argues for Rate Hikes as Bullard Counsels Patience

The dollar dipped to a four-day low against a basket of major currencies on Friday, as traders looked to USA inflation data due next week to provide more clues on the Federal Reserve's policy outlook.

The dollar was little changed on Friday as traders marked time ahead of next week´s USA inflation-linked indicators, while commodity currencies such as the Canadian dollar held to gains after crude oil prices bounced.

CLEVELAND The Federal Reserve cannot directly address the problems of inequality, globalization and the challenges facing lower-income Americans, a Fed official said on Friday, though it can help identify solutions for legislators to take up.

"It is far from clear that a goal of monetary policy is to cause a deterioration in these aspects of financial markets", he said.

President of the Federal Reserve Bank of Cleveland Loretta Mester said the USA economy is in "pretty good" shape, advocating further hikes in base borrowing costs.

Yields are being held down to a large degree by a run of soft inflation data, which has boosted the appeal of government debt and raised doubts about the Federal Reserve's plans to raise interest rates at least one more time this year.

The rate hikes, she said, "are meant to keep the economy healthy, not to slow down the expansion", she told a Fed-sponsored conference here.

USA government bonds remained stuck in a holding pattern Friday, with yields slipping slightly on a daily and weekly basis as investors awaited more data to either confirm or challenge their lowered inflation expectations.

"The FOMC can wait and see how key macroeconomic developments play out in the quarters ahead".

Partisan politics in Washington do not make it any easier for the White House on top of that all, meaning the U.S. economic reform is likely to go all swings and roundabouts, and might get painful at times, in the form of a short recession even, should worst come to worst. Benchmark 10-year notes were unchanged on the day in price to yield 2.15 percent.

  • Zachary Reyes