(Reuters) – San Francisco Federal Reserve Bank President Mary Daly said on Thursday she believes interest rates need to be raised to the 4.5%-5% range and left at year-end*) to control inflation, but said she could support more action if inflation did not fall as expected.
“I’m satisfied” policymakers’ forecasts released last week showed that most see the Fed’s policy rate rising to 4%-4.5% this year and 4.5%-5% next year, Daly told reporters after an event at Boise State University. “It will take a period of restrictive policy to get clear and convincing evidence that inflation is returning to 2% — so in my view, that won’t happen until at least next year.”
The Federal Reserve last week raised interest rates for the third time in a row 75 basis points, raising its policy rate target range to 3%-3. 25%. Asked whether the turmoil in global markets would prompt her to support a pause in rate hikes, Daly said global financial markets were only part of the equation.
“I really see if financial conditions have tightened more than the funds rate has tightened more than expected , because now people realise that all over the world is tightening and financial markets are really reacting. If that is the case, then, you know, slowing growth but still moving towards the right terminal rate is appropriate,” Dai said. Lee said.
“However, if inflation continues to be very high and inflation does not moderate and the labor market moderates only moderately, then this is basically an economy that still has a lot of momentum and inflation remains Too high – we will have to keep moving up as we will understand that the terminal rate is not as close as it should be
