Federal Reserve Bank of San Francisco President Mary Daly warned the markets on Friday, emphasizing that although current data suggests the Federal Reserve (Fed) is on track to achieve its inflation goals, the central bank is prepared to raise interest rates further if inflation threatens to accelerate again.
Key points:
- The labor market remains stable and well-balanced.
- The Fed’s previous policy framework was designed not only to reaffirm the 2% inflation target but also to highlight that the Fed will not overstep when it comes to a healthy labor market, as long as inflation remains subdued.
- The Fed is ready to raise rates if inflation shows signs of surging again.
- When asked how the Fed might respond to policies from the incoming president, Daly stated that preemptive action would likely be inappropriate, and the Fed should wait to see the actual policies and their net effects.
- Global central bank policies are now less synchronized than in the past.
- In today’s uncertain world, it’s difficult to predict how quickly inflation will return to 2% and how durable the strength of the labor market will be. Therefore, a thoughtful and cautious approach is needed.
- The upcoming December Fed meeting will be particularly crucial.
Fed’s Daly