Mary Daly, the president of the Federal Reserve Bank of San Francisco, expressed that although tighter monetary policy is helping to decrease the pace of inflation, policymakers should not feel too comfortable with the current level. In an interview on CNBC’s “The Exchange,” Daly stated that the news on inflation has been positive, but it is still too early to declare victory.
These comments follow a statement from Fed Chair Jerome Powell, who caused concern in financial markets when he expressed that he and his fellow officials are “not confident” that policy has sufficiently addressed the issue of inflation.
Daly likened the Fed’s task of determining the appropriate level of policy restriction to someone riding a horse and trying to decide if the bridle has been pulled back far enough to stop. She emphasized the need to closely monitor economic data in order to determine if the current level of restriction is sufficient to bring inflation down.
During its recent meeting, the Federal Open Market Committee opted to keep rates unchanged, maintaining the Fed’s benchmark borrowing level in a range between 5.25% and 5.5%, its highest level in 22 years. Daly, who will be an FOMC voter in 2024, did not commit to a specific stance on future rates, indicating that the Fed will assess incoming data and adjust policy accordingly.
Daly emphasized the importance of taking a forward-looking approach and highlighted the Fed’s flexibility to respond to evolving economic conditions. Overall, she acknowledged the positive position the Fed is in, but cautioned that it is still too early to claim victory.
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