MNI BRIEF: Fed's Daly Downplays Stagflation Risk As Rates Rise

San Francisco Fed President Mary Daly said Tuesday the U.S. economy can probably escape a 1970s-style bout of stagflation because America has emerged as an oil exporter since then and because economic growth will likely remain around its long-run trend rate.

Sustaining trend growth is “quite remarkable” given headwinds and disruptions such as the war in Ukraine, she said, and noted private forecasters continue to see U.S. growth around 2%.

The main risk is stronger inflation pressures and “we have inflation that’s already too high,” Daly said. Inflation will remain above 2% through this year, and interest rates may need "marching up" to neutral or even beyond to bring it in line, she said.