MNI: Fed's Daly Watching For Impact From Global Tightening

San Francisco FedPresident Mary Daly is watching how much faster global financial conditions tighten in this economic cycle compared with the "Great Recession" when the U.S. was mostly going it alone, and affirmed America's economy has enough momentum to keep growing.

“You see central banks across the globe, many of them, not all of them, moving their policy adjustments so that they are no longer as accommodative as they were,” to get policy “more in line” with inflation targets, she said after a speech.

“The global economy is struggling really with the same thing the U.S. economy is struggling with—high inflation,” she said on a call with reporters when asked about links between Fed tightening and the global economy. The lingering Covid pandemic and the war in Ukraine are also global issues putting “further pressure on supply chains,” she said.

“One of the factors that I’m looking at relative to the actions after the Great Recession and the expansion after that, is that we have more central banks adjusting policy rates at the same time, which will tighten global financial conditions more quickly in all likelihood than it did after the financial crisis when we were tightening and a couple of other countries were.”

While central banks from New Zealand to the U.K. have hiked rates, some investors see the Fed as more aggressive with perhaps 50bp hikes at the next two meetings. Some major peers are also holding back, notably the ECB, while China is looking more at adding stimulus. Japan's yen has also tumbled as investors look at differences in monetary policy.