MNI BRIEF: Fed is Far From Goals Needed to End QE, Daly Says

The U.S. economy remains far from full employment and inflation conditions needed to end bond purchases, and the Federal Reserve will telegraph any reduction of monetary stimulus well in advance, San Francisco President Mary Daly said Tuesday.

"We are a long way from digging out of the hole that Covid caused," Daly said during a webinar with Minneapolis Fed President Neel Kashkari. Fears of rapid inflation are a bit overblown, she said, noting that tolerating a phase of inflation around 2.5% wouldn't be that different than when the Fed was coping with price gains around 1.5%.

Near term inflation gains are "transitory" and there are perhaps 8.5 million Americans on the sidelines of the job market, she said. Still, Daly said her economic outlook is "bullish" though policy makers only have a few months of strong economic data in hand. Sources have told MNI the Fed may tolerate strained asset markets as they seek to get the economy back on track.