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The Federal Reserve should wait and see how the economy develops given the high uncertainty surrounding the outlook for the U.S. economy, San Francisco Fed President Mary Daly said Friday.
“When we know where we’re going and it’s important to get there, moving aggressively makes sense,” Daly said in a speech at a banking conference in Frankfurt. But she noted that sometimes a “different type of boldness is required: the boldness to wait.”
Daly added: “When uncertainty is high and the risks to our objectives more balanced, we need to practice gradualism. That means the Fed is saying, We don’t know yet.”
Traders in derivative markets now expect the Fed to remain on hold until next May and that the next move will be to cut rates. The central bank last raised its benchmark rate to between 5.25%-5.5% in July.
Daly said Fed officials are not certain whether inflation is on track to return to 2%. She said the central bank is also not sure whether all the negative effects from past tightening have hit the economy.
“And we are uncertain about whether the dynamics we observe today are cyclical remnants of the post-pandemic recovery or indicators of structural shifts and a new normal for the national and global economy,” Daly added.
The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
rose slightly to 4.44% in early trading on Friday.
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