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Mary Daly backs Fed’s steady rate hold, urges readiness to act
The Fed held its target rate at 3.5% to 3.75% last week, while Daly said inflation should be assessed as either temporary supply shocks or a longer-lasting trend.
Federal Reserve Bank of San Francisco President Mary Daly said she is completely supportive of the Fed’s decision last week to hold interest rates steady as it collects more information about inflation that is still above the Fed’s 2% goal, according to Reuters.
Speaking at an economics conference in Tokyo, Daly said the central bank should gather enough data before the September meeting to judge whether current price pressures are driven by supply shocks that may fade, or whether a more durable inflation situation is emerging.
Daly urged the Fed to be vigilant in watching incoming information and to be prepared to take action if needed, adding that she is concerned about how renewed inflation could affect public expectations and that the Fed might need to respond aggressively if inflation momentum builds again.
Daly also argued there are good reasons to expect supply-driven shocks will not have a lasting impact on inflation, pointing to limited pricing power for businesses and saying consumers remain focused on oil prices when assessing inflation and whether an end to the Middle East war would reduce that contribution to price pressure.