Reuters- San Francisco Federal Reserve BankFederal Reserve Bank President Mary Daly said on Tuesday that the central bank is resolute about bringing down high inflation but also wants to do so as gently as possible so as to not drive the economy into a downturn.
Daly said at a symposium held jointly with the Monetary Authority of Singapore that it is important to navigate through this high inflation environment as carefully as possible so that we don't leave longer term damage to our labor market. The Fed is aggressively raising interest rates to bring down inflation that is more than three times its 2% target. The central bank's third straight increase in the size last week was the rise of 75 basis points, and it signaled that it would likely lift the policy rate - now in the 3% 3.25% range, to 4.4% by year-end and 4.6% next year.
The Fed Chair Jerome Powell said he expects that raising rates at that pace will push up unemployment and be painful for some households and businesses, but ultimately it would be more painful to allow inflation to get infected.
Price stability is fundamental, Daly said on Tuesday. She hopes that as the Fed raises rates to slow demand, the supply side will heal, allowing the two to meet in the middle, because of the U.S. inflation is about half due to excess demand and about half due to constrained supply. She said that the Fed may need to do more on demand to make sure inflation does come down because supply chains are still tangled and labor supply doesn't return as quickly as had been hoped.