San Francisco Federal Reserve President Mary Daly said Friday she expects the central bank will need to raise interest rates further, saying Americans are 'on a treadmill of high inflation' despite a stronger-than-expected October jobs report.
Speaking to CNBC's Steve Liesman, Daly said the pace and timing of any further tightening remained undecided. 'My expectation is we're going to have to tighten policy further. Exactly when and how much is still to be decided because we just have to take all the variables that are coming in,' she said. 'More is likely to be needed, and certainly ... I'm prepared to do that if that's what the economy calls for.'
The comments came the same day the Bureau of Labor Statistics reported the U.S. economy added 165,000 jobs in October, nearly triple the Dow Jones consensus estimate, while the unemployment rate edged lower to 4.1%. Daly called the report 'good news for American workers' but said household finances remained under pressure, with average hourly earnings rising 3.1% annually in October while the September inflation rate as measured by the consumer price index was 3.7%.
'They see that they can get jobs, they continue to spend. They're not out of the game, but they are on a treadmill of high inflation,' she said. 'This has been high for too long, almost six years, and we're really starting to feel the burden of that spread everywhere.'
Daly said she was not generally concerned about economic growth but worried about inflation's persistence. 'The job market remains stable and solid, but not booming, and you see real wages falling because those wages are not really keeping up with inflation,' she said. 'I think that's the crux of this. Good news on the jobs front, not so clear that Americans are going to gain ground in the labor market.'
The rate-setting Federal Open Market Committee raised its benchmark rate by a quarter percentage point in September to a target range of 3.75%-4%, but held rates at its meeting last week, saying it preferred to wait for 'the accumulation of more information.' Daly supported both decisions, saying the world 'is filled with uncertainty.' She will vote on the committee next year and said she still favours a gradual approach.
Richmond Federal Reserve President Thomas Barkin said Thursday he also expects higher rates ahead but was unsure of the timeline.
Analysis
Why This Matters
- Further rate hikes would raise borrowing costs for mortgages, credit cards and business loans across the US, with ripple effects on global markets.
- The strong jobs report gives policymakers room to keep tightening while inflation remains above target, but it also means real wages are still falling.
- With the Fed on hold for now, Daly's comments signal another hike is likely in coming meetings, depending on incoming data.
Background
The Federal Reserve has been raising its benchmark interest rate to bring inflation down from multi-decade highs. After a quarter-point increase in September, the Federal Open Market Committee held rates steady at its most recent meeting, saying it wanted more information before deciding its next move.
Key Perspectives
Mary Daly (San Francisco Fed president): expects the central bank will need to tighten policy further, with the exact timing and size still to be decided, and says inflation has been 'high for too long.'
Thomas Barkin (Richmond Fed president): said Thursday he also sees higher rates ahead but is unsure of the timeline.
What to Watch
- The next FOMC meeting and whether the committee follows Daly's signal with another rate hike.
- Upcoming inflation and jobs data that will shape the Fed's decision on pace and timing.
- Daly's voting position next year, when she becomes a voting member of the rate-setting committee.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedThe headline says Daly expects further rate hikes while inflation has been high for too long.US Top News and Analysis: “Americans are on a 'treadmill of high inflation' and more rate hikes are likely, Fed's Daly says. ... "This has been high for too long, almost six years"”
- SupportedDaly told CNBC's Steve Liesman on Friday that further tightening was expected, but its pace and timing were undecided.US Top News and Analysis: “Mary Daly said Friday she expects the central bank will need to raise interest rates further, but joined her fellow policymakers in saying the pace and timing remain uncertain. ... Daly told CNBC's Steve Liesman during a live interview.”
- SupportedDaly said, “My expectation is we're going to have to tighten policy further. Exactly when and how much is still to be decided because we just have to take all the variables that are coming in.”US Top News and Analysis: “"My expectation is we're going to have to tighten policy further. Exactly when and how much is still to be decided because we just have to take all the variables that are coming in," Daly told CNBC's Steve Liesman”
- SupportedDaly said, “More is likely to be needed, and certainly ... I'm prepared to do that if that's what the economy calls for.”US Top News and Analysis: “"More is likely to be needed, and certainly ... I'm prepared to do that if that's what the economy calls for."”
- SupportedThe October jobs report showed 165,000 jobs added and unemployment edging down to 4.1%.US Top News and Analysis: “the U.S. economy added 165,000 jobs in October while the unemployment rate ... edged lower to 4.1%.”
- SupportedOctober job creation was nearly triple the Dow Jones consensus estimate.US Top News and Analysis: “Job creation, in fact, was nearly triple the Dow Jones consensus estimate.”
- SupportedAverage hourly earnings rose 3.1% annually in October, while September CPI inflation was 3.7%.US Top News and Analysis: “Average hourly earnings rose 3.1% annually in October, but the September inflation rate as measured by the consumer price index was 3.7%.”
- SupportedDaly described Americans as being “on a treadmill of high inflation.”US Top News and Analysis: “"They see that they can get jobs, they continue to spend. They're not out of the game, but they are on a treadmill of high inflation," she said.”
- SupportedDaly said inflation had been high for almost six years and its burden was being felt broadly.US Top News and Analysis: “"This has been high for too long, almost six years, and we're really starting to feel the burden of that spread everywhere."”
- SupportedDaly said the job market remained stable and solid but not booming, and that real wages were falling because wages were not keeping up with inflation.US Top News and Analysis: “"The job market remains stable and solid, but not booming, and you see real wages falling because those wages are not really keeping up with inflation," Daly said.”
- SupportedThe Fed raised its benchmark rate by a quarter percentage point in September, bringing its target range to 3.75%-4%.US Top News and Analysis: “The rate-setting Federal Open Market Committee in September increased the central bank's benchmark overnight borrowing rate by a quarter percentage point to a target range of 3.75%-4%.”
- SupportedRichmond Fed President Thomas Barkin said Thursday that he expected higher rates but was unsure of the timeline.US Top News and Analysis: “Richmond Fed President Thomas Barkin said Thursday he also sees higher rates ahead but is unsure of the timeline.”
