Fed's Daly: Inflation is not the only risk, but recent inflation readings are more encouraging

Federal Reserve (Fed) Bank of San Francisco President Mary Daly noted on Monday that despite recent relief in inflation figures, the Fed will have no choice but to keep policy rates pinned higher for longer if price growth doesn't continue cooling to the Fed's 2% target range.

Key highlights

Inflation is not the only risk.

We have made a lot of progress on inflation, there is still work to do.

The bumpiness of inflation data so far this year has not inspired confidence.

We must fully restore price stability without a painful disruption to the economy.

If inflation falls rapidly or the labor market softens more than expected, lowering the policy rate would be necessary.

If inflation falls more slowly than expected, the policy rate must stay higher for longer.

We are nearer to a point where benign outcome on labor market could be less likely.

At this point, we have a good labor market, not a frothy one.

Restrained demand, not improved supply is likely needed to get inflation to 2% goal.

Recent inflation readings are more encouraging, but it's hard to know if we're on track to sustainable price stability.

 At this point, the risks to inflation and the employment mandate are in better balance.

Preemptive cutting is something you do when you see risks, but right now the labor market is good.

There's no evidence that stagflation or recession is in our future.

US stock market rallies reflect enthusiasm for the future.

 It's very clear monetary policy is restrictive.

Excess consumer saving has been largely exhausted, we should see spending slowing.

The US economy has been remarkably resilient.