Mary C. Daly, President of the Federal Reserve (Fed) Bank of San Francisco, highlighted the uncertainty facing the Fed while participating in a fireside chat at George Mason University in Virginia.
Key highlights
The last three months has left considerable uncertainty about the next few months of inflation.
There is considerable uncertainty about inflation in the next three months.
Daly is getting different signals from firms who say consumers seem to be getting choosy but input prices are not yet receding.
The balance sheet offers no signal about monetary policy.
Currently no evidence that the labor market is approaching a worrisome position.
Fed's Daly sees a really healthy labor market and inflation that is too high.
Risks to employment and inflation goals are balanced.
Fed policy is restrictive but it may still take time to bring inflation down.
More from Fed Daly
2% is the inflation target and the Fed is not going to change the goalpost while it is trying to reach it.
Other issues for framework will likely be the neutral level of rates, probablity of hitting zero lower bound on rates, and path of potential output.
A softening labor market would be getting back to normal growth.
If the labor market falters, I would think about adjusting the rate.
It is far too early to declare labor market fragile and faltering.
Still seeing disinflation underway; no doubt things are slower now than last year.
I am still seeing supply improvements; there is no evidence the Fed has to really push the economy down.
Inflation expectations are well anchored, and consumers are becoming price sensitive.
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