MNI POLICY: Daly: Markets Aligned With Fed's Stimulus Outlook

San Francisco Fed President Mary Daly said Wednesday that while stronger forward guidance or QE could be deployed, financial markets are already signaling they understand the message that policy will be loose for quite some time.

"We can always do more forward guidance of course, and we can do additional quantitative easing," Daly told reporters, adding she doesn't see any "misalignment" with the market.

"We see a yield curve that's pretty flat," said Daly, who becomes an FOMC voter next year. Markets are "pretty much understanding what we are doing."

The U.S. economy will face setbacks as long as Covid-19 remains an issue that could lead to new isolation orders for businesses and families, and the recovery so far still leaves the labor market far from full employment, Daly said. Congress could help by extending fiscal aid to families who lose their jobs through the pandemic, saying lack of new aid could be a headwind.

"We will continue to make some progress as we continue to open, and as Covid progresses, we will find out if we can stay open," she said. "Until we are past Covid, we will likely be in a place of fits and starts."