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Fed knows how to fight inflation, will seek to do so 'moderately' – Daly

Ann Saphir and Michael S. Derby

(Reuters) – San Francisco Federal Reserve Bank President Mary Daly said on Tuesday that the U.S. central bank has the tools and knowledge to reduce high inflation and Will use them even if it tries to find the “gentest” method.

Daly told an event at the Council on Foreign Relations in New York City that the Fed has “a lot” of room to use higher interest rates to reduce demand and ease price pressures, noting that the current high inflation is roughly the cause of the Half of the reasons are a product of excess demand.

“If we do our job and communicate to the public why we are doing what we are doing, and why the rate path we are taking is necessary to bring down inflation, then price stability is important to It is extremely important for us to do this as gently as possible so that the economy is as easily balanced as possible – no matter what it looks like, we are going to take the easiest path we can find,” she said. .

Americans don’t expect inflation to stay high for long, surveys show, she said, and those anchored inflation expectations prove Americans already trust the central bank. “I think as inflation goes down, trust goes up.”

The Fed is raising U.S. interest rates faster this year than in decades to fight inflation, which is also three times the rate of Fed 2 Many goals. The sharp rise in the Fed’s policy rate – 3.00-3.25%, expected to hit 4.6% next year – caused global market volatility and declines in most currencies Against the dollar, pressure on these central banks to raise their own borrowing costs has increased in many countries.

Daly said the Fed is concerned about the impact of a rising dollar and rising U.S. interest rates on global economic growth, as slower growth abroad can feed back into the domestic economy.

“If Europe slips into recession, it’s a headwind; if China falters, it’s a headwind for our growth, and we have to take that into account so that we don’t end up with excessive policy tightening ,”she says.

Likewise, the Fed must take into account that other central banks are also raising their own interest rates to reduce inflation in their own countries, thereby tightening global financial conditions.

However, she said, the Fed’s mission is to achieve U.S. price stability and full employment, and that’s what the Fed is focused on.

Despite the recent volatility in markets over the past few weeks, she said, “We still have a healthy, stable financial system.”



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