Fed's Daly, Bowman see need for more rate hikes, stress data-dependency
By Alexander Bueso
Date: Monday 08 Aug 2022
(Sharecast News) - A top Federal Reserve official said that the US central bank was "far from done yet" when it came to lowering inflation.
In remarks on broadcaster CBS's 'Face the Nation', on Sunday, Federal Reserve bank of San Francisco president, Mary Daly, also said she did not believe that inflation had become embedded in the economy, rather supply and demand were not balanced with half of excess inflation due to demand and the remainder to supply.
"It just is going to take some time for the interest rate adjustments we've made to work their way through," she explained.
"And we are far from done yet. That's the the promise to the American people. We are far from done."
She also reiterated that a 50 basis point interest rate hike at the Federal Open Market Committee's 20-21 September policy meeting would still be "appropriate".
But she also highlighted that policymakers needed to remain data-dependent.
"We need to leave our minds open. We have two more inflation reports coming out, another jobs report," she said.
"Right now, I think the most important thing is that inflation is too high. Americans are losing ground every day, so the focus has to be on bringing inflation down."
As for geopolitics developments "or just more generally among countries and all of those things. The war in Ukraine, all of those things create headwinds, if you will, for the US economy and we're going to have to lean against those headwinds for growth while we bridle inflation."
The day before, Michelle Bowman, one of the Federal Reserve's governors, said that 75bp rate hikes should be on the table "until we see inflation declining in a consistent, meaningful, and lasting way."
However, she too stressed the need to be data-dependent.
In remarks prepared for a speech to the Kansas Bankers Association, the governor said that: "While I expect that ongoing rate increases will be appropriate, given the uncertainty in how those data and conditions will evolve, I will allow that information to guide my judgment on how big the increases will need to be."
Her own forecast was for the economy to pick up again in the back half of 2022 and for "moderate growth" over 2023 although tighter monetary policy might limit job gains and possibly result in lower employment.
Daly was not a vote-wielding members of the Federal Open Market Committee, the Fed's main policy-making body, in 2022, but Bowman was.
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