MNI BRIEF: Daly Sees Fed Hiking To 4.5%-5% And Holding

San Francisco President Mary Daly said Friday the Federal Reserve is likely to raise interest rates as high as 5% to tackle stubborn inflation and keep restrictive policy for some time, some of her most hawkish comments to date.

The latest dot plots are a reasonable starting point and rates could reach 4.5% to 5% with policy makers remaining flexible in response to new data, Daly told Yahoo Finance. The latest CPI report was disappointing but not surprising and Fed hikes are already working to slow housing, the job market and retail sales, Daly said.

“We are tightening into a strong economy” and there's no strong case for a pause or a reversal, she said. “I am very focused on that hardship” from inflation and to avoid expectations of big price gains becoming embedded, she said, adding there's no doubt “we need to put a more restrictive” policy in place. It could take another year for tighter policy and supply-side relief to change inflation dynamics, Atlanta Fed economist Brent Meyer told MNI. (See: MNI INTERVIEW: Entrenched U.S. Inflation To Linger - Meyer)