San Francisco Fed President Mary Daly made a rare Good Friday appearance for a moderated discussion on the economy and monetary policy outlook. She emphasized patience:
On the economy:
- There is a little bit of pulling forward on spending, but not as much as you might think
- US economy remains “in a good place” with “good momentum” despite some sectors like transport showing slowdown
- Consumer and business spending remains resilient despite sentiment concerns
- Labor market cooling gradually without major disruption
On inflation:
- Restrictive policy continues putting “downward pressure on inflation”
- Sees “very, very gradual process on inflation” requiring continued restrictive stance
- Inflation risks have “increased” and needs vigilant monitoring
- Committed to bringing inflation back to 2% target
On monetary policy:
- “Policy is in a good place” with “no rush” to make changes
- SEP median projected two rate cuts this year, but could be “fewer if inflation stickier”
- “More cuts if growth falters” showing data-dependent approach
- Emphasizes “gradual policy rate reductions” with “no urgency”
- Neutral rate “may be rising” and estimates around 3% remain “uncertain”
The market continues to price a high chance of a June rate cut (70%) but Fed officials don’t see it, at least not yet.
This article was written by Adam Button at www.forexlive.com.
