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Daly – Considerable Uncertainty Above Next Few Months, Not Changing 2% Goalposts

FED
  • SF Fed’s Daly (’24 voter) said in a fireside chat that the timing of U.S. interest rate cuts will depend on the path of inflation.
  • "The three months we've just seen is why you don't declare victory before you get confidence" that inflation will continue to fall toward the central bank's 2% target.
  • "There's considerable uncertainty now about what the next few months of inflation will be. The confidence bands have widened."
  • If the labor market falters would think about adjusting rate, but she’s not yet worried about it – it’s strong and healthy and slowing as expected.
  • She sees real r-star between 0.5-1% and it's probably risen for a number of reasons, which could mean it might take more time to bring down inflation.
  • As a policymaker, can't bet on productivity jump "saving us" from inflation, but "I wouldn't be surprised" that AI will raise productivity because the technology is available and labor markets are tight.
  • Talking about the Fed’s framework review: we are not changing the goalposts so the 2% inflation target will stay and we're not changing the ample reserves regime.
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