Mary Daly – A succession of incidents have blighted the last year, but the repercussions of inflation are still being felt today.
While it has lessened considerably, the Federal Reserve is on track to hike interest rates again in order to address the remaining issue.
The necessity of another rate rise was also emphasized by Mary Daly, President of the San Francisco Fed.
On Saturday, Mary Daly stated that the Federal Reserve should not only raise but also maintain interest rates at current levels.
She said that doing so would allow them to deal with the rising prices brought on by inflation.
“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 increases to bring prices down caused fear on 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.”
With the announcement of new economic data, the concern drove dramatic market fluctuations, as uncertainty motivates investors to seek rapid solutions.
Nonetheless, Daly believes that accomplishing the stated target will take time and “a broader view.”
Additionally, Mary Daly stated that the Fed’s current tightening strategy was (and continues to be) reasonable given the volume and duration of high inflation readings.
Daly also challenges the disinflationary trend, citing substantial inflation in the goods, housing, and associated sectors, as well as robust economic indicators.
While Mary Daly does not presently vote on Fed policy, she is a member of the Federal Open Market Committee and attends policy meetings.
Federal Reserve warnings
The Federal Reserve issued similar warnings a week before Mary Daly’s address.
Minneapolis Federal Reserve President Neel Kashkari stated last Wednesday that he is open to the potential of a higher 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 shared similar comments, stating that the Fed’s policy rate should be raised by half a percentage point at the next meeting.
A day later, Fed Governor Christopher cautioned that interest rates might rise faster than expected.
He alluded to a string of better-than-expected economic figures.
Read also: Stocks dropped in 2nd month of the year
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 nearly zero to 4.5% to 4.75%.
They lowered their raises to a quarter of a percentage point in February, after dropping half a percentage point in December.
Inflation had reached a four-decade high in 2022, but it began to recede in the last quarter.
Yet, January inflation figures revealed that the rate of price rises was gradually increasing again.
Gold prices have paused as a result of the several warnings issued in recent weeks.
Prices fell from an early two-and-a-half-week high on Monday, as traders awaited US Federal Reserve Chair Jerome Powell’s judgment for signals on future rate rises.
Spot gold had earlier 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.
Meanwhile, gold futures in the United States climbed modestly, reaching $1,855.10.
Also, the dollar index rose 0.1%, making greenback-priced bullion more costly for foreign purchasers.
Many are anticipating Powell’s testimony to Congress on Tuesday and Wednesday, followed by the February jobs report on 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 often used as a hedge against inflation, increasing interest rates may reduce demand for zero-yielding metal.
Mary Daly discussed the potential of interest rates rising (and remaining there) if data continues to be hotter than expected on Saturday.
According to Reuters technical expert Wang Tao, current gold might continue advances into a range of $1,867 to $1,876 per ounce due to resistance breaching at $1,853.
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