MNI BRIEF: Fed Rate Hikes Won't Cause Recession, Daly Says

San Francisco Fed President Mary Daly said Tuesday that interest-rate hikes will help slow inflation later this year without erasing the U.S. economy's strong growth momentum.

“I’m not expecting that we’ll fall into recession, and we could slow so it looks like we’re teetering close to it, that’s possible, but it will be a short-lived event I expect, and then we will be back up,” she said. “We have a lot of momentum in the U.S. economy,” and it's more resilient to higher crude oil prices than it was in the 1970s because America has become a net exporter, she said. The job market is also "extremely tight" now she said and the Fed is committed to getting inflation under control.

“Interest rates, while they are going to rise, are still on track to be relatively low by historical standards," she said, referencing a neutral rate around 2.5%. Daly also echoed Chair Jerome Powell's comments that QT could start as soon as the May meeting.