Mary Daly says the Fed doesn’t want to send the US economy into a recession

Mary Daly, president of the Federal Reserve Bank of San Francisco, speaks during a Bloomberg Television interview in San Francisco, California, U.S., on Thursday, Aug. 11, 2022.

David Paul Morris | Bloomberg | beautiful pictures

On Tuesday, President of the Federal Reserve Bank of San Francisco, Mary Daly, said the US central bank was “resolute” in reducing high inflation but also wanted to do so “as gently as possible” to do not bring the economy into recession.

Daly said at a symposium held in conjunction with the Monetary Authority of Singapore, it was important “to navigate this high-inflation environment as carefully as possible, to leave no lasting damage.” more for our labor market.”

The Fed has aggressively raised interest rates to bring inflation down to more than three times its 2% target. Last week’s 75 basis point rate hike was the central bank’s third consecutive hike of that size, and it signals that it is likely to lift policy rates – currently in the 3% range. -3.25% – to 4.4% at the end of the year and 4.6% the following year.

Fed Chairman Jerome Powell said he hoped that raising rates at that rate would push unemployment higher and hurt some households and businesses, but that it would ultimately hurt more. if inflation is entrenched.

“Price stability is fundamental,” Daly said on Tuesday. US inflation is about half due to excess demand, and about half due to limited supply, she said, and hopes that as the Fed raises interest rates to slow demand, the supply side will heal as well, allowing two sides “meet in the middle.”

However, supply chains are still in disarray and labor supply has not returned as quickly as expected, she said, so the Fed will likely have to do “a little more” as required to ensure inflation is subdued. .

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