MNI BRIEF:Daly Warns Against Fast Rate Hike As Prices May Fade

San Francisco Fed President Mary Daly warned Tuesday against "prematurely" raising interest rates in reaction to a jump in food and energy prices that could fade next year, saying that strategy would "bridle" the economic rebound.

"Our policies take 12 to 18 months to work themselves through -- will do very little about changing the fact that Vietnam had to close the ports for for COVID. But we will absolutely affect the pace of job growth going forward, the pace of the recovery of labor supply," she said at a NABE webinar.

"If we find ourselves in that situation where there's downward pressure on prices, as we have had for more than a decade, we will find ourselves with lacking both full employment and price stability. And that's just too much risk to take." There may not be enough data to judge whether inflation is transitory or the job market is pulling in all the workers it can until the middle of next year, Daly said. "It's not about time. It's about does it persist past or beyond when COVID is really disrupting things?" she said when asked to define transitory.

"As we get through the pandemic, we will see prices moderate. And we'll be back to that situation in which we have had for more than a decade of forces dragging inflation down, not pushing inflation up," she said, adding there hasn't been a jump in longer-run inflation expectations.

Philadelphia President Patrick Harker on Monday expressed more concern inflation risks may warrant a rate increase next year, while Chicago's Charles Evans said no rate increase is needed. Chair Jerome Powell has said hiking isn't under current discussion because the economy is not at full employment. Fed adviser Diane Swonk told MNI last week the central bank could raise interest rates three times next year.