San Francisco Federal Reserve (Fed) chair Mary Daly asked the central bank for patience in the face of high inflation that she predicted will likely fade on its own as the pandemic recedes.
“Reacting in response to things that are not likely to last will push us further, not closer, to our goals.Daly said in statements prepared to be released to the Commonwealth Club of California.
Rising interest rates now would not fix supply chain bottlenecks and other temporary problems that are driving prices up, he said, but it would slow job creation and recovery.
“While it’s easy to mistake movement for ability or action for attention, running headfirst in fog can be costly. Patience is the boldest action we can take“, he pointed.
The statements of Daly occur when some of his colleagues, most recently the president of the Fed St. Louis James Bullard urged a quicker end to asset purchases to put the central bank in a position to raise rates. The Fed began phasing out bond purchases this month and expects to finish them entirely by mid-2022.
Daly, who votes this year on the monetary policy of the Fed, indicated that the uncertainty about how long the pandemic will continue to disrupt the economy makes it difficult to predict how long high inflation will last and how quickly workers marginalized by concerns about the COVID-19 they will return to the workforce.
“Over the next few quarters, as the asset purchase curtailment takes place, we will watch how the economy fares and see if inflation declines and workers come back“, said.
“As we get a clearer signal, we will be ready to act accordingly, continuing to provide or withdraw support as needed to ensure the economy settles in a sustainable place.”. added.
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