Fed’s Mester: A recession could happen as rates rise

Cleveland Fed President Loretta Mester said as the Federal Reserve’s higher interest rates slow the economy, a recession may result, though it’s not part of her baseline forecast and is not what the central bank wants.

US Dollar Index prints mild gains around 104.15 as bulls flirt with the six-week high amid early Friday. The hawkish Fed commentary and upbeat US data, as well as the US-China tension, could be considered to play major roles in portraying the DXY’s three-day uptrend.

“I don’t think it’s a positive outcome, but it may happen,” Mester said. “We may have a mild recession – I can’t rule that out. I haven’t penciled that in to my own projection, but when you have growth well below trend, it wouldn’t take that much of a negative shock — but again I don’t think that’s necessarily a positive thing, that’s not what we are engineering to do.”