Recent weakness in economic data along with financial market turmoil has severely dented rate hike hope this year from FED. This week two key policymakers at FED, Brainard and Tarullo publicly raised the possibility of a first rate hike next year and openly criticized Philip curve of classical economics, which is favored by some FED policymakers including Janet Yellen.
However, Loretta Mester, president of Federal Reserve Bank of Cleveland is clearly not in the camp. According to Mester, a monthly job gains in tune of 70,000-120,000 should keep unemployment rate stable. Compared to that number, job gains averaged well above that and close to 190,000.
She believes US economy is strong enough to handle a rate hike this year and FED should move away from emergency measure of zero interest rates since a small increase from zero is not tightening.
Latest data last night showed that inflation in US hasn't deteriorated as much as expected in September, in spite of lower oil price. In fact core inflation rose to 1.9% in September from a year ago.
Focus is totally on FED's December meeting as no hike is expected in October, however statement would be well scrutinized for further clues.
Ms. Mester, however is not a voting member this year but will be in 2016.
FXCM US Dollar index is currently trading at 11895.


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