San Francisco Federal Reserve Bank President Mary Daly said on Wednesday she expects the US central bank will need to raise rates at least four times this year, and likely more, to stop high inflation from getting worse.
“There is broad agreement that inflation is too high and the policy rate is too low,” Daly said at the Los Angeles World Affairs Council & Town Hall.
It is important, she told reporters after the event, to have “a little more urgency” on raising interest rates; a rate hike every other meeting “doesn’t satisfy the moment,” she said, and neither does waiting until later in the year to start reducing the Fed’s $9 trillion balance sheet.
Daly’s embrace Wednesday of a series of four or more rate hikes was a notably hawkish shift from her previous support for a less aggressive stance.
She also said the Fed may need to consider a bigger-than-usual half-percentage-point rate hike down the road, although for now quarter-point rate hikes remain her expectation.
“Raising rates at least four times — at least — would be my preference, but it most likely will need more than that” to bring demand back into line with supply — unless consumer demand falls more than she expects, or supply chains get fixed faster than she anticipates.
Financial conditions are more accommodative now than they should be, given the strength of the economy and the pace of job gains, she said. – Reuters
