MNI: Daly Says Fed Still Has More Work To Do On Rates

Persistent inflation pressures mean the Federal Reserve is not yet finished tightening monetary policy in order to ensure inflation returns to its 2% target, San Francisco Fed President Mary Daly said Saturday.

“It’s clear there’s more work to do,” Daly said in prepared remarks. “In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”

“Overall inflation remains well above target and contributions from each of the components of inflation – goods, housing and other services – remain well above their historical trend,” she said at a Princeton University event.

(See MNI INTERVIEW: Fed Could Need To Hike Rates More Than Expected-Hoenig)

Daly argued that while inflation expectations have remained contained, a number of factors like labor shortages and lasting supply bottlenecks could lead to higher longer-run price pressures.

“The longer inflation remains high, the more likely it is to undermine confidence. And once high inflation becomes embedded in public psychology, it is very hard to change."