Fed's Daly
San Francisco Fed Pres. Mary Daly is speaking and says:
- Monetary policy is restrictive.
- Progress isn't victory, must remain resolute
- To ensure we fully achieve goals, we need to finish the work.
- We need vigilance and agility.
- The economy still has considerable momentum.
- We are a long way from 2% inflation and a long way from sustainable employment.
- Even with recent slowing in the labor market, job growth remains well above what needed to keep pace with growth.
- It's possible the slowing so far it will translate into steady march towards goal
- There are real risks in inflation projection.
- Will need to see progress on a super – core inflation to be confident we are on path to 2%.
- If continue to see labor market and inflation calling we can hold rates steady
- If financial conditions remain tight, that reduces need for more action from fed
- But if calling inflation stalls or financial conditions loosen, will need to raise rates further
- Need to keep an open mind, have optionality on rates
- With rising bond yields, the need to do additional tightening by Fed is not there
HMMM... I think the last comment is key. Remember the Fed has earmarked one more hike between now and the end of the year.
Daly is not a voting member this year.
Looking at yields:
- 2 year yield 5.02% -3 basis points
- 5 year yield 4.678% -4.3 basis points
- 10 year yield 4.712% -2.3 basis points
- 30 year yield 4.876% -0.1 basis points
- Dow Industrial Average is down -110 points.
- The S&P is down -21 points and the
- NASDAQ index down -72 points
More from Daly:
- We could easily overcorrect – need to take time to do it right
- I don't see dysfunction in the markets right now
- Markets have a better sense now, I think about the Fed's reaction of function – that we want to get inflation down to 2%
- We should not assume that we are now in a higher rate environment
- There is a huge difference between renegotiating labor contracts and a wage-price spiral
- We are not in a wage-price spiral
- Short run inflation expectations have calmed down, and that releases wage pressure
- I'm seeing a slowdown in hiring, but not a cliff
- I don't see anything that's ringing an alarm bell about workforce
- Going to start seeing more dispersion in the FOMC dot plot
- If inflation comes down more than projected, Fed would need to calibrate policy
- We are going to keep going until we are confident of inflation path to 2%
- Market probabilities for Fed funds rate hike this year are not extraordinarily high, and that's consistent with how think about things
