San Francisco Federal Reserve President Mary Daly said Friday she wasn’t sure the central bank has raised interest rates high enough to bring inflation back down to the 2% target.
In an interview on CNBC, Daly was asked if rates were “sufficiently restrictive” to bring inflation down.
“I don’t know yet. And I think that’s ok,” Daly replied.
While markets are demanding certainty from the Fed, “the truth is we don’t know,” she added.
At the moment, Fed policy was “in a very good place,” Daly said, able to react however the economy evolves.
The Fed needs to stand in a “ready position,” on its toes to raise interest rates again or stop monetary tightening depending on the economic data, she added.
“That ready position is something everyone understands in sports….but when we do it in policy, people find it confusing,” Daly said.
The Fed isn’t focused on one or two reports. Anecdotal data will play a role.
“I’d really like to get out of the idea that data dependence is a single report or even two reports,” Daly said. Anecdotal data will play a big role. “It will be constellation of data that we are going to have to look at,” she said.
At its meeting last week, the Fed left interest rates unchanged in a range of 5.25%-5.5%.
The central bank’s economic forecast in September had one more rate hike penciled in, but traders in derivative markets see only a slim chance of a move at the next meeting in December. They see a greater chance of an interest-rate hike early next year.
Stocks
DJIA
SPX
were higher on Friday while the 10-year Treasury yield
BX:TMUBMUSD10Y
rose to 4.64%.
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