Mary Daly – This year has been overshadowed by a succession of upheavals, but the impacts of inflation may still be felt today.
While it has fallen slightly, the Federal Reserve is on track to raise interest rates to address the underlying concern.
The necessity of another rate increase was also emphasized by Mary Daly, President of the San Francisco Fed.
On Saturday, Mary Daly proposed that the Federal Reserve not only raise but also maintain interest rates at their present levels.
She said that doing so would allow them to deal with inflation-related pricing increases.
“There is more work to do,” said Daly at Princeton University.
“In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”
“Restoring price stability is our mandate, and it is what the American people expect. So, the FOMIC remains resolute in achieving this goal.”
Mary Daly also admitted that excessive inflation and the Fed’s aggressive rate rises to reduce prices scared both Main Street and Wall Street.
“The responses range from fearing these actions will tip the economy into a recession to fearing they won’t be enough to get the job done.”
The revelation of new economic data caused significant market volatility, as uncertainty motivates investors to seek immediate solutions.
Nonetheless, Daly believes that reaching the stated aim would take time and “a broader view.”
But still, Mary Daly noted that, given the volume and duration of high inflation readings, the Fed’s current tightening strategy was (and continues to be) reasonable.
Daly also puts into doubt the disinflationary trend, citing high inflation in the products, housing, and associated sectors, as well as solid economic indices.
Mary Daly is a member of the Federal Open Market Committee and attends policy meetings, although she does not vote on Fed policy at the moment.
Federal Reserve warnings
The Federal Reserve expressed similar worries a week before Mary Daly’s address.
Minneapolis Federal Reserve President Neel Kashkari stated last Wednesday that he is open to a larger interest rate rise during the Fed’s March policy meeting.
“Whether it’s 25 or 50 basis points,” said Kashkari.
Similarly, Atlanta Fed President Raphael Bostic suggested that at the next meeting, the Fed’s policy rate should be raised by half a percentage point.
The next day, Fed Governor Christopher suggested that interest rates might climb faster than expected.
He stressed a series of economic data that were stronger than expected.
Interest rate progress
The Federal Reserve has done a lot in the last year to keep inflation under control.
It increased its goal range from close to zero to 4.5% to 4.75%.
After a half-point drop in December, they lowered increases to a quarter-point cut in February.
In 2022, inflation hit a four-decade high, although it began to recede in the last quarter.
Yet, January inflation figures revealed that the rate of price rises was progressively increasing once more.
Gold prices have stalled as a result of the fresh concerns.
Prices fell from a two-and-a-half-week high on Monday as traders looked for indications about future rate rises from US Federal Reserve Chair Jerome Powell’s decision.
Spot gold reached a high of $1,858.19 per ounce on February 15, but it is presently down 0.3% at $1,849.33 per ounce.
Similarly, gold futures in the United States climbed little to $1,855.10.
Also, the dollar index rose 0.1%, making greenback-priced bullion more costly for foreign purchasers.
Many people are anticipating Powell’s congressional testimony on Tuesday and Wednesday, followed by the February employment data, which is expected Friday.
“Currently, gold is in a wait-and-see mode,” said UBS analyst Giovanni Staunovo.
“There’s unlikely to be a change of script from Powell, reiterating the need for further rate hikes to bring inflation under control.”
While gold is commonly used as an inflation hedge, increasing interest rates may reduce demand for the zero-yielding metal.
Mary Daly speculated on the likelihood of interest rates rising (and staying there) if Saturday’s report is hotter than predicted.
According to Reuters technical expert Wang Tao, current gold prices may increase further into the $1,867 to $1,876 per ounce range if resistance at $1,853 is broken.