San Francisco Fed President Mary Daly said some recent inflation data has been "very good," but the Fed has not yet achieved price stability.
On Thursday, at a bank funding conference sponsored by the Dallas and Atlanta Feds, Daly said she was looking for more confidence that inflation was returning to the Fed's 2% target before calling for a rate cut. "We are not at price stability right now," she said. "We've had some very good data, but even though the inflation data earlier this year was positive and the data was good, we are not at a point where we can get inflation sustainably back to 2%."
Daly, a voting member for monetary policy this year, reiterated comments last week that risks to the labor market and price stability are better balanced, but the Fed remains committed to its 2% inflation target. "We are at an inflection point, and a further slowdown in the labor market could lead to a further increase in the unemployment rate," Daly said. "Of course, no one is guaranteed that the labor market will slow."
“So we have to keep those two mandates in mind,” she said, referring to the Fed’s mission to achieve maximum employment and price stability.
Fed officials have said in recent weeks they are increasingly confident that inflation is on the right track. Most have not said when they might cut borrowing costs from 20-year highs, but analysts and investors interpreted their comments as a signal that action would come in September.
Daly warned people to be patient with the prospect of rate cuts, saying Fed officials must "balance the cost of moving quickly and making mistakes" and it is important to avoid policy mistakes. This echoed Powell's testimony on Capitol Hill, where Powell told lawmakers that there are two-sided risks in the Fed's policies, that is, acting too early or acting too late. Powell previously said, "We continue to make decisions on a case-by-case basis. Easing policy too early and too much could harm the progress of inflation."
The Fed’s preferred inflation measure, known as PCE, has fallen to 2.6%, and a once-overheated labor market has fallen to pre-pandemic levels. While officials continue to describe the labor market as strong, they also say it may be approaching a turning point with a steady decline in job openings and a gradual rise in the unemployment rate.
Daly was also asked about last year’s regional banking stress and the collapse of Silicon Valley Bank and other lenders. Daly said the 12 regional Fed banks and the Fed’s board of governors in Washington are working to formalize how the regional banks communicate information about financial institutions to board officials.
Daly and other regulators have come under scrutiny following last year's turmoil in the U.S. banking sector.
The article is forwarded from: Jinshi Data
