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Mary Daly says Treasury bond steps will not drive Fed policy

The San Francisco Fed president said the Fed should stay anchored to its inflation and labor-market mandate, arguing long yields reflect global forces rather than a clear signal for near-term policy.

Reported · Written up by our desk · Central Banks

San Francisco Fed President Mary Daly pushed back on concerns that Treasury intervention in long-dated debt markets could blur the line between fiscal debt management and monetary policy. Speaking on Bloomberg television, she said it is too early to judge how Treasury’s expanded buybacks might affect the Fed’s work and that it is “early days,” with policymakers needing time to assess implications.

Daly stressed that the Treasury Secretary is different from the Fed and said the central bank remains focused on its congressional mandate, including returning inflation to 2%. She also played down the idea that a recent surge in long-term yields should automatically dictate immediate Fed action, saying the rise reflects a global phenomenon driven by multiple forces and offers limited signal for policy adjustments.

Instead, Daly pointed to the behavior of shorter-dated yields, saying markets appear to understand the Fed’s reaction function. She described current monetary policy as being in a “good place” and reiterated support for the Fed’s July decision to keep the federal funds target range at 3.50% to 3.75%.

Daly’s broader message was institutional rather than directional, emphasizing that the Fed “cares about its independence and its credibility and sticks to its remit,” and she said she does not see credibility at risk. She also rejected pressure for preemptive rate moves, saying she sees little evidence that a cut or hike is an urgent problem to solve given recent data.

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