Fed's Daly
SFFed President Daly

The SF Fed president Mary Daly is speaking saying:

  • balancing Fed two mandates is always a challenge.
  • I'm not comfortable with high inflation.
  • Supply chain bottlenecks are pushing prices up
  • US economy is getting into a more self-sustaining path.
  • When trying to get economy to a self-sustaining path, have to be gradual and not disruptive
  • We are not behind the curve at all.
  • I do see rate increases as early as March. In December no policy makers thought rates would go above terminal rate by end of cycle.
  • What we see today is broad-based price pressures.
  • Demand and supply and bounces is pushing prices up. The Fed needs to act
  • there is no preset course for Fed policy; there is a lot of risks.
  • If the economy progresses as I expect, it is clear it can stand partially on its own 2 feet.
  • Fed does not need to keep providing extraordinary accommodation.
  • You don't want to ratchet up the rates so quickly that it bridles growth too much.
  • We hope that supply chains repair, and fiscal aid is rolling off.
  • We need to adjust the policy rate, absolutely.
  • If Fed gets to 1.25% by the end of the year, that's quite a bit of tightening, but it's still supporting in the economy.
  • That balance is the appropriate thing to do.

With rates at 0.25%, Daly is thinking toward 4 tightenings if rates do get to 1.25%. At the December meeting, the FOMC members have projected three hikes but the market has priced in for an potentially five.

  • Our two goals feel somewhat in tension
  • Inflation is too high and labor market for disadvantaged groups is stronger than it has been a long time.
  • It's time to adjust policy rate to get the economy on a sustainable path
  • Dont want to be too quick to declare victory on unemployment
  • Completely comfortable with making rate adjustments in 2022 but open about 2023
  • You could pretty much use any averaging period you want and fed would be meeting 2 inflation on average
  • We still have aging population, slower productivity growth, lower neutral rate of interest that are putting down pressure on inflation in the medium run.
  • Financial markets are looking at wide range of things, not just Fed rate hikes.
  • I am always looking at financial conditions, which a matter for the economy and ensuring we are not part of the problem by not being transparent enough
  • Making proclamations of a specific rate path would be misinformation