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MNI BRIEF: Daly Says Fed's Rate Remains Below Neutral

(MNI) OTTAWA
(MNI)

The Federal Reserve's key lending rate remains below a short-run neutral level that's probably about 3% today, San Francisco President Mary Daly said Wednesday.

“We’re not even up to neutral right now,” she said on a Twitter talk with Reuters, saying the short-run neutral rate is different from the FOMC's views on the long-run rate around 2.5%. Further hikes needed to pull down inflation aren't necessarily restrictive, she said, adding that the pace of the September move depends on new economic data. The June SEP showing about another 100bps of hikes by year-end remains a reasonable view, she said.

“Markets are really ahead of themselves” pricing rate cuts, she said, and the Fed could hold borrowing costs at their peak for something like a year to make sure price stability is restored. (See: MNI STATE OF PLAY: Powell Signals 75bp Sept Fed Hike Possible)

MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com
MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com

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