Fed’s Daly sees need for higher rates, possibly above 5.1%

The president of the Federal Reserve of San Francisco, Mary Daly, said that the terminal interest rate of 5.1% that most Fed officials estimated in December is a “good indicator” about where monetary policy is headed, but that the central bank could raise rates further.

“I’m willing to take her more than that, if more is needed.Daly said Friday in an interview on Fox Business Network.

Daly made the comments hours after a report from the US Department of Labor showed that employers added more than half a million jobs in January, a staggering number, he said, showing that the job market remains strong despite the slowdown in the economy.

“Today’s number in the jobs report was staggeringDaly said. Rate forecasts for December fedwhich showed a median estimate of around 5.1% at the end of 2023, were “a good indicator of where the policy is heading at least”, he added.

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Daliwho is not a voter on the Federal Open Market Committee (FOMC), is the first Fed official to comment after US central bankers met earlier this week and that the president, Jerome Powell, addressed the media on Wednesday in Washington.

In the middle of this week, the Fed raised its benchmark rate range by a quarter of a percentage point, from 4.5% to 4.75%, saying it still expects they will be needed.”continuous increases” for monetary policy to be tight enough to reduce high inflation.

“At this time, the most important thing to convey to our listeners is that the direction of the policy is to get even tougher and maintain that restrictive stance for some time.“, said.

Dali He said he expects it to take longer than just this year to win the war on inflation. As of December, inflation by the Fed’s preferred gauge was 5%.

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“We will have to be in a tight policy stance until we really know and believe that inflation will come back down to our 2% target.the official said, adding that Fed officials are “determined and united” to achieve this.

“I think it’s too early to declare victory and even think about peakingon inflation, he said. “Right now, the most important thing to convey to listeners is that the direction of the policy is to further tighten up and stick with that restrictive stance for some time.”.

slight increase

Policymakers slowed the pace of rate hikes again this week, raising their benchmark by a quarter of a percentage point to a range of 4.5% to 4.75%. The smaller move followed a half-point rise in December and four 75-basis-point gains before that.

Inflation records for the last three months have shown a slowdown in price increases. However, the higher-than-expected employment data indicates that the labor market remained extremely tight in January. Payrolls increased by 517,000 last month and the unemployment rate fell to 3.4%, the lowest in 53 years.

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Powell He told reporters the central bank is committed to further tightening until inflation comes down significantly, something that will require a broader cooling of demand across the economy.

He said officials hope to offer a “pair” for additional rate hikes, then hold it for the full year, contradicting investor bets that the Fed will start cutting later in 2023.

Source: Bloomberg and Reuters