Mary, President of the Federal Reserve Bank of San Francisco Daly Policymakers will need to increase interest rates and keep them high, according to experts. for a longer Period of time

“It’s clear there is more work to do,” Daly In remarks made Saturday for a Princeton University, New Jersey. “In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”

Daly said inflation remains high in each sector — goods, housing and other services — and that the bumpy nature of incoming data paints an unclear picture for Disinflation momentum However Daly doesn’t vote on policy This year she’s a Participate in Federal Open Market Committee meetings or discussions.

Fed’s tightening has been aggressive in the 12 month period, raising its benchmark policy From nearly nothing to a Target range between 4.5% and 4.75%. However, policymakers recently reduced the rate of increase. They have slowed their rate increases to a Quarter percentage point change on February 1st after hiking a Half point for December following four 75-basis points increases. 

“This tightening, while pronounced, was and remains appropriate given the magnitude and persistence of elevated inflation readings,” Daly said.

Daly In order to adequately cool inflation and keep demand down, she has previously stated that the interest rate will need to increase to above 5%. She said last month that the FOMC’s December projections — which show rates peaking at 5.1% this year, according to the median forecast — were still a Good indicator of where policy It was most likely to be headed.

InflationIt was called “The Greatest” a The 40-year peak was reached last year. However, it fell in the final three months of 2022 and then rebounded in January. That month’s data also showed strong consumer demand and blockbuster hiring by firms.

There are many of Daly’s colleagues have since said that interest rates may need to go higher than they previously thought, and investors are now betting on a peak around 5.45%. You could reach this level by adding 25 points to each of these meetings. Daly did not specify in Saturday’s speech how much more tightening she thinks is appropriate. 

At their meeting on March 21-22, policymakers will present their economic projections. 

Daly He also discussed the uncertain future direction of inflation. Prior to the pandemic Fed officials had struggled for years to get prices up to the central bank’s 2% target as an aging workforce and sluggish productivity growth weighed on inflation. 

There are new factors now, including the reshoring and production. a Domestic labor shortage is the greatest need for Investing in infrastructure and technology has been a major driver of increased spending a Transition to more sustainable energy sources a Potential changes in inflation expectations could push inflation up. It remains to be determined how these forces will interact with disinflationary factors from the past. Daly said.

“We don’t know what the trend will be,” Daly said. “But we do know that, while we continue to diffuse the ongoing inflation shock, we need to be working to gather data and research that illuminates the likely path forward.”

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