MNI Policy: Fed's Daly Says Her Bias is Towards Job Creation

By Evan Ryser

     WASHINGTON (MNI) - San Francisco Fed President Mary Daly said she's biased

towards supporting an economic expansion with further room for job growth while

also facing sluggish inflation.

     "With little inflationary pressure and considerable uncertainty about the

threshold for full employment, I'm biased towards including as many workers as

possible in the expansion," Daly told a conference co-hosted by the Reserve Bank

of New Zealand and the IMF. 

     Daly said she was supportive of the Fed's July rate cut and said it was

"neutral to slightly accommodative." 

     The economy is in a "good place" but facing "headwinds," she said, adding

she will continue to see how "gusts" impact the economy.

     Speaking to reporters following her keynote, Daly would not comment on

Senator Thom Tillis's call for a hearing in the Senate Banking Committee

regarding Fed independence. Tillis's call for a hearing comes after former New

York Fed President Bill Dudley suggested current policy makers act in a

political manner and not enable President Trump's escalation of trade disputes.

     Daly said she feels "no political pressure" when acting as a central bank

policymaker.

     Daly also warned about persistent misses of the 2% inflation target to the

downside. "We're already seeing signs of softness in survey- and market-based

measures of longer-run inflation expectations."

     "Inflation rates in many countries have remained stubbornly below 2 percent

for more than a decade," she said. "This is despite considerable monetary

stimulus and relatively healthy labor markets," Daly said.

     Despite a dovish bias, however, Daly pushed back on notions that the

economy can run hotter without any negative consequences, pointing to reductions

of investments in employee training, financial stability issues and high levels

of corporate debt. 

     There are "pockets of concern" but the financial system overall remains

"resilient," Daly said. "There is no free lunch. There are potential

consequences to running a hot economy we need to consider." 

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com