MNI POLICY: Fed's Daly: Virus Not Material Risk to US Outlook

By Greg Quinn

     (MNI) - The U.S. economy remains in a "good place" and China's coronavirus

outbreak hasn't created a material risk to monetary policy, San Francisco Fed

President Mary Daly said Monday.

     The outlook remains for growth above trend, low unemployment and inflation

moving back towards target, Daly told reporters after a speech in Dublin.

China's growth likely faces a temporary setback and there are few signs so far

the U.S. economy faces the same disruptions, while other headwinds to global

demand like Brexit and trade have settled, she said.

     "There isn't a material change in the U.S. outlook given the accommodation

we have taken in," Daly said, a reference to the Fed's three rate cuts last

year. "Policy is in a good place, the economy is in a good place, and barring a

material change in the outlook, then I'm comfortable with policy where it's at

for the foreseeable future."

     Past virus outbreaks suggest economies bounce back when the situation is

brought under control, she said. "I wouldn't want to make policy based on a

transitory development in inflation, we make policy based on the underlying

trend in inflation, and that's why for now, I'm watching the coronavirus

carefully to see if it has any longer term effects on the economy."

     "If you think about the growth rate in the United States being affected by

this, we haven't seen much yet on that -- the most important impact would be

through confidence and we haven't seen that yet either," she said.

     Daly also elaborated on her earlier speech about options for boosting

inflation, saying that looking at average inflation over a business cycle has

some merit. Her speech mentioned other potential tools like nominal income

targeting and boosting the inflation target.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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