MNI: Fed Must Be Mindful Of Overdoing Rate Hikes, Daly Says

The Federal Reserve needs to continue with rate hikes to bring down inflation while being careful not to ignore the drag from past tightening and signs price gains are moderating, San Francisco President Mary Daly said Monday.

"We want to go far enough that we get the job done. That’s the resolute part. But not so far that we overdo it. And that’s the mindful part," Daly said in a speech to the Orange County Business Council in Irvine, Calif.

Daly said the last 75bp rate hike to 3.75%-4% makes policy “modestly restrictive relative to the neutral rate of interest. And we have signaled that there is more work to do.” Her remarks didn't indicate the size of the rate hike needed at the next meeting.

Policy tightening is more than just the fed funds rate but also the effects of QT, forward guidance and the cumulative global tightening, Daly said. Action has been needed to counter inflation that has been "unacceptably high" for almost two years, she said. The last inflation report "had some encouraging numbers, including a long awaited decline in goods price inflation," she said.

Other Fed officials have indicated recently it's time to slow hikes to 50 basis points after four consecutive 75bp increases. Tom Barkin at the Richmond Fed told MNI rates could also move to a higher peak than thought earlier even as the pace of increases fades. (See MNI INTERVIEW: Fed's Barkin-Prices May Force Higher Rates Peak)