Fed’s Mary Daly says it’s ‘too early to declare victory’ on inflation


Mary Daly, president of the Federal Reserve Bank of San Francisco, poses after giving a speech on the U.S. economic outlook, in Idaho Falls, Idaho, on Nov. 12, 2018.

Ann Saphir | Reuters

Tighter monetary policy is helping bring down the pace of inflation but not to a level where policymakers should feel too comfortable, San Francisco Federal Reserve President Mary Daly said Friday.

“The news on inflation has been fairly good, and we shouldn’t dismiss that,” the central bank official said during an interview on CNBC’s “The Exchange.” “All of that said, it is far too early to declare victory.”

Those comments come a day after Fed Chair Jerome Powell helped spook financial markets when he said he and his fellow officials are “not confident” that policy has reached a point of being tight enough to get inflation down to their 2% target.

Daly compared the Fed’s job to get policy to the “sufficiently restrictive” benchmark to someone riding a horse and trying to know whether the bridle has been pulled back far enough to stop.

“You don’t know if the horse is feeling that bridle enough to be sufficiently restrictive to stop,” she said. “So much like the horse, we’re in a position now where we know we’re significantly restrictive. But to really be truly confident that we have a sufficient level of restriction in the economy to bring inflation down, we’re going to have to watch the data and see if the economy is slowing.”

For the second meeting in a row, the Federal Open Market Committee last week decided to hold rates in place, with the Fed’s benchmark borrowing level targeted in a range between 5.25% and 5.5%, its highest in 22 years.

Daly, who will be an FOMC voter in 2024, did not commit to a position on the future of rates, instead saying the Fed is in a place where it can evaluate the incoming data and move accordingly.

“We’re going to be very forward-looking here, and so that’s why it’s too early to declare victory. But I don’t want to discount the fact that we’re in a good place because we can be able to move easily and agilely, depending on what the data brings,” she said.

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