Fed’s Daly ‘Definitely More Bullish’ on Economy Than a Year Ago
(Bloomberg) -- Federal Reserve Bank of San Francisco President Mary Daly said she is more bullish on the economy than she was a year ago, but it’s still premature to take action on rates.
“The whole linchpin here is do I see things persisting when the tentacles of the long tail of the delta variant start to move past us,” Daly, one of the central bank’s most dovish officials, said of inflation.
“If we don’t have another surge and we’ve got the same data you see today, and we’re in June or July, well it’s a different conversation,” Daly said Tuesday during an interview with reporters.
Fed officials are conflicted between consumer price increases not seen in three decades and stubbornly low labor force participation, complicating how soon they should act to tighten policy and with which tools. U.S. consumer prices rose 6.2% in October, the fastest annual pace since 1990, adding fuel to the ongoing debate over whether inflation will prove temporary or more persistent.
Daly said that “demand is completely out of sync with supply” due to Covid-related disruptions, but that inflation isn’t expected to persist when the pandemic subsides. That said, if inflation doesn’t come down closer to the Fed’s 2% objective next year, “that would be important information for me to consider,” she said.
In a speech earlier Tuesday, Daly said that “reacting in response to things that aren’t likely to last will move us farther from — not closer to — our goals,” but acknowledged that the Fed can’t say for sure that current “eye-popping” rates of inflation will leave a more lasting imprint on overall prices.
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