Hawkish comments from Fed Williams and Cook are supporting US dollar 💵

New York Fed chief John C. Williams and Lisa D.Cook of the Federal Reserve Board commented today on the US monetary policy situation:

Fed Williams

• Fed policy is not very restrictive at the moment although overall I see that financial conditions have tightened;
• The Federal Reserve may need to maintain a restrictive monetary policy even for several years;
• If financial conditions loosen too much, as expected by the Fed's outlook, the Fed will have to raise interest rates;
• There are many indications that the U.S. economy is becoming more resilient but we may slow down rate hikes now as we are closer to the peak. If the situation changes, however, we may move faster than 25 bps;
• 25 bps rate hikes seem to be the best option for now. Currently, however, a target rate of 5%-5.25% is a reasonable target;
• Maybe service prices will remain high, and if that happens, we will need higher rates. Demand for services as well as labor is still very high, demand in the economy is stronger than usual;
• There is a lot of uncertainty around the outlook for inflation, it may prove to be more persistent for some reasons;
• So far, commodity prices are falling but there is a long way to go before a further decline. However, inflation driven by the rental market is weakening, and the housing sector is clearly slowing down;
• The labor market is extremely tight, and it is unclear whether and by how much unemployment will rise. With a strong economy, job growth may continue to rise.

Fed Cook

• The data paint a clear picture of a strong labor market with persistently high inflation. The cycle of increases is not over yet;
• Inflation is still too high despite the decline, the Fed will maintain a restrictive monetary policy for a long time;
• It is possible that the upward path of the unemployment rate will be lower than the latest Fed forecasts. I believe that inflation can be contained without a large increase in unemployment;
• The combination of a strong labor market and falling wages and prices has raised hopes of a soft landing. I expect inflation to continue to decline this year and next, although progress may be uneven
• Lower rate hikes are more appropriate now, as the Fed assesses the cumulative impact of past hikes;
• The Fed has seen improvement but needs to pay attention to a lot of data. In 2023, U.S. GDP growth seems most likely today though I expect it to be below average.

The USDDIDX Dollar Index reacted with an initial rise to Williams' comments, but supply came to a head near the SMA100 average (black color) and is attempting to pull back the 'greenback'. Source: xStation5