MNI BRIEF: Daly Says Prudent For Fed To Retain Optionality

Federal Reserve Bank of San Francisco President Mary Daly Monday declined to say what the Fed should do at the June FOMC meeting but said risks to the economy are getting more and more balanced.

"At this point in our tightening cycle, it is prudent to resist the temptation to say what we're going to do for the rest of the year," she said at an event hosted by the Banque de France and the National Association for Business Economics. "Optimal policy, appropriate policy for the American people [and] for the American economy is about extreme data dependence and policy optionality."

(See: MNI INTERVIEW: Fed Seen Pausing In June, Could Restart-Acharya)

"It's still a lot of time to collect the information before we make a decision about what to do in June or what to do for the rest of the year," she said adding that tighter credit conditions may be akin to one to two Fed hikes. "We have to balance those two risks, overtightening versus under tightening, and that is getting more and more challenging as the risks are more and more balanced."

"We don't know right now how large that credit tightening will ultimately be and how long it will last."