Fed's Mester: How much inflation is allowed above 2% will depend on economy

Low rates and the reduced correlation between unemployment and inflation drove the Federal Reserve's framework review, Cleveland Federal Reserve President Loretta Mester told Yahoo Finance on Friday.

Additional takeaways

"The Fed wants inflation to run higher than 2% for some period after it's been running low."

"The key thing is wanting to anchor inflation expectations and how much inflation is allowed above 2% will depend on the economy."

"Forward guidance and explaining our policy will be part of the Fed's toolkit."

"Shutdown created a very deep hole and despite positive economic gains we are not back to where we were in February."

"US economy could end the year down 6% compared to last year and unemployment could stay elevated."

Market reaction

The US Dollar Index largely ignored these comments and was last seen losing 0.7% on a daily basis at 92.35.