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MNI: Daly Sees Fall Taper Clarity, Hike Talk Not Yet on Table

(MNI)

San Francisco Fed President touts policy stability over next few months amid job and price data noise during economic restart.

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San Francisco Federal Reserve President Mary Daly said Tuesday that while there should be more certainty in the fall on the economic rebound and policy makers are right to open talks now on preparing to taper QE, it's premature to look at raising policy interest rates.

The backdrop means looking to the fall to get some clarity as to the future of the economy, Daly told reporters after a speech. She expects good economic momentum as working families send children back to school, vaccines continue to roll out, and enriched unemployment benefits expire.

Daly echoed Chair Jerome Powell's comments last Wednesday that the time has come to move towards discussion of scaling back QE, because the economy is "moving along in that direction" towards the FOMC's goal of substantial progress. Fully realizing that benchmark may take until around the end of this year or early next year, Daly said.

Asked about potentially pulling back on MBS bond purchases as a priority to slow a housing boom, Daly said policy makers must consider broad support for the economy across the yield curve. Housing gains are also linked to fundamental demand for more space during the pandemic, she said.

With inflation and jobs data volatile in the short term, including price gains around perhaps 3% in the next few months before fading, the economy continues to need a lot of support and particularly from low interest rates to help consumers, she said.

"Talking about rate changes right now isn't even on the table. We still need to support" the recovery, Daly said. "The important thing is to remain sort of steady in the boat."