Mary Daly Emphasizes the Need to Maintain Monetary Policy

Mary Daly, president of the Federal Reserve Bank of San Francisco, stated that monetary policy must remain strict until sustained progress is seen. She anticipates that inflation will continue its downward trend. Daly emphasized the importance of ensuring economic stability before considering adjustments to interest rates. Her statement reinforces the Federal Reserve’s stance on controlling inflation with strict measures.

Cautious Approach to Future Rate Cuts

During a Q&A session in Phoenix, Daly stressed the necessity of maintaining high interest rates to ensure economic stability and control inflation. The Federal Reserve kept rates unchanged last month, prioritizing stability despite previous adjustments in monetary policy. Daly emphasized that sustained progress in inflation is crucial before considering any potential rate reductions in the future. Her remarks reinforce the Federal Reserve’s cautious approach to balancing economic growth and controlling inflation effectively.

Inflation Remains a Challenge

Recent data showed the consumer price index experienced its sharpest rise since August 2023, signaling inflationary pressures across various economic sectors. Increasing costs in food, fuel, and housing significantly contributed to this surge, intensifying financial strain on households. Economists express growing concerns about persistent inflation, which could influence future monetary policy decisions and economic stability. Policymakers may face pressure to implement stricter measures to control inflation and mitigate its impact on consumers and businesses.

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Confidence in Interest Rate Pressure

Daly expressed optimism regarding inflation’s improvement, citing the effect of high interest rates on economic activity. However, she acknowledged that stabilizing inflation requires more time than initially hoped. While progress is being made, Daly emphasized the need for patience in managing economic conditions. She noted that achieving sustained inflation control will demand continuous effort from policymakers.

Assessment of Trump’s Economic Policies

The president of the San Francisco Fed emphasized analyzing the effects of Trump administration’s economic policies before adjusting the monetary strategy. She highlighted the importance of careful assessment to ensure informed decisions. Daly stressed that premature adjustments could undermine the effectiveness of current monetary policies. Policymakers must consider long-term impacts before altering strategies in response to political or economic shifts.

Decisions Without Haste

Daly dismissed concerns about uncertainty affecting Federal Reserve decision-making, stressing the institution’s focus on data and future actions. She emphasized that the Fed remains committed to evaluating economic trends and adjusting policies as needed. The Federal Reserve continues to prioritize careful assessment in determining its next steps despite external uncertainties.

Warning Against Policy Inaction

Daly’s statements aligned with Governor Christopher Waller’s warning in Sydney, where he emphasized that waiting for full clarity may hinder action. Waller stressed that inaction could negatively impact the economic response, delaying necessary adjustments. Both leaders highlighted the need for timely decision-making to maintain effective economic policy and stability.