Fed’s Daly says inflation will moderate and it’s premature to raise rates

The president of the Federal Reserve from San Francisco, Mary Daly, stated that he expects inflation to moderate once the COVID-19 backtrack, repeating that it would be “pretty premature” to raise rates now or even accelerate the Fed’s reduction in bond purchases.

“Uncertainty forces us to wait and watch carefully,” Daly said in an interview on Bloomberg TV.

In a nod to the economic progress made since the first COVID-19 vaccines went live late last year, the Fed began cutting its monthly bond purchases last week in a downsizing process that is expected to last up to the middle of next year.

Interest rate hikes are expected to begin once the reduction in bond purchases has been completed, as a slight majority of the Fed’s policy makers considered in September that they should not start before 2023 .

This deadline is drawing criticism from some sectors, as it could put the US central bank behind in the fight against inflation.

Consumer prices in the United States rose 6.2% in October compared to a year earlier, the fastest annual rate in 31 years, according to a government report.

This is high inflation, Daly said, and painful, but it is being driven by supply chain bottlenecks and high consumer demand for goods, which will pass as COVID-19 fades. . Similarly, the job offer is limited by the fears and impact of COVID-19.

The Federal Reserve’s monetary policy cannot affect supply problems, Daly said, and tightening policy now could increase the cost of investments and slow progress in resolving bottlenecks.