Fed Daly karate meme

San Francisco Fed President Mary Daly is out with some candid comments today. She's plugged into the core of the Fed and was the first to signal a higher path for Fed rates in November 2021. Her latest comments skew hawkishly but it's conditional on the final round of data before the March 22 FOMC decision.

  • I am beginning to think the labor market has a shortage of workers
  • Anecdotes from business leaders suggest inflation is slowing more than recent data suggests
  • Inflation is still high, have to think about 'continuous tightening'
  • It would be a mistake to say we've done all we can do, impact of policy is still ahead
  • Further policy tightening, maintained for a longer term, will likely be necessary
  • Reshoring and the continued decline in labor force participation could mean more inflationary pressures ahead
  • The disinflation momentum we need is far from certain

Between this and Waller, it looks like the Fed is setting up a shift in the dots to 6% or just below. There is certainly plenty of grey area and it's contingent on the data between now and March 22 but it's a fine line. Obviously, the market wasn't spooked by Waller so I don't see that changing on Daly but Powell is speaking on Wednesday and if he strikes some of these notes, the market could take notice.