MNI BRIEF: Fed's Daly Eyes 'Stepdown' In Pace of Rate Hikes

San Francisco Federal Reserve President Mary Daly said Friday the FOMC needs to start considering a slowing the pace of interest rate hikes in order to avoid tightening monetary policy too much, adding the benchmark lending rate could reach 4.5% to 5% next year.

“We don’t just keep going up in 75 basis point increments, we do a stepdown," she said. “That doesn’t mean step down as in pause and don’t raise, it means step down to increments that are easier to manage, 50, 25, where you’re still moving up but you’re doing it in a way that is not so aggressive.” Stock markets rallied and bond yields slipped as dovish hints from the Fed signaled the prospect of slower rate hikes.

Five or six months of data on falling inflation are needed before the Fed can say with any certainty how quickly price growth will moderate, St. Louis Fed research director Carlos Garriga told MNI. (See: MNI INTERVIEW:Fed Awaits Inflation Peak For Next Moves-Garriga)