MNI BRIEF: Fed Rates Need To Stay Restrictive - Daly
MNI (WASHINGTON) - U.S. monetary policy needs to stay restrictive until inflation slows to 2% and that progress has been slow and bumpy, Federal Reserve Bank of San Francisco President Mary Daly said Tuesday, signaling rates are likely to stay higher for longer for now.
"Policy needs to remain restrictive until I see that we're really continuing to make progress on inflation," she told a community bankers meeting in Phoenix, Arizona. "Now we want to be careful before we make the next adjustment so we're getting this right."
The economy is in a good place growth and the labor market continue to be solid, but the decline in inflation has been very gradual and getting back to price stability will "take longer than anyone wants," she said. Tax cuts and deregulation from the Trump administration are positive for growth, while tariffs could slow economic activity and accelerate inflation and immigration restrictions could bridle labor supply growth, she said. The net effect of all these policies are as yet unknown and the Fed is "keeping a watchful eye" on new policies and data. (See: MNI: Fed In Holding Pattern As Inflation To Stay High-Ex-Staff)