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MNI BRIEF: Fed's Daly Warns Rate Hike Won't Fix Supply Strains

MNI (Ottawa)

San Francisco President says higher rates are more likely to hold back needed jobs recovery.

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San Francisco Federal Reserve President Mary Daly warned Friday that raising interest rates would be a futile move when it comes to unlocking supply chains damaged by the pandemic, while hurting the economic momentum needed to restore full employment and keep inflation on track.

"What I would see is almost no effect on supply chains," Daly said during an online discussion. "But it will absolutely slow the trajectory of growth" and "we could find ourselves then in a place where we have missed full employment" and "we might even miss on our price stability goals."

"No one knows what inflation is going to be next year," so the choice is more about managing the risks around missing projections, she said. "A lot of this is transitory, it's Covid related."

"Being patient to wait for the uncertainty around the data to emerge, is not the same as being asleep," she said.