As the U.S. economy continues to rebound from the pandemic-induced recession, interest rates remain at near-zero levels, while inflation continues to grow at its fastest pace in over a decade. That’s prompted some economists and policymakers to advocate for raising interest rates to prevent the economy from potentially overheating.
But “we are a long way” from raising interest rates, said Mary Daly, the president of the San Francisco Federal Reserve, on Wednesday.
Daly acknowledged that “inflation data has been coming in high for longer than we expected,” and attributed that to “ongoing disruptions from the pandemic and the delta variant,” she told reporters on Wednesday.
Daly suggested that raising interests rates in the near future isn’t appropriate given how much uncertainty there is about the spread of COVID-19, especially given the delta variant.
That said, she appears to agree with Federal Reserve Chairman Jerome Powell, who thinks that the end of this year is a reasonable time for the Fed to stop injecting more money into the economy by purchasing bonds and other assets.
The Fed has been buying $80 billion in bonds and $40 billion in mortgage-backed securities each month. Daly said it will likely be too early by the end of this year to stop purchasing assets entirely unless full employment is achieved — which she doubts will be the case.
“We still have over 6 million people on the sidelines,” she said, referring to the number of people who haven’t gone back to work since the pandemic started.
Asked about Dallas Fed president Robert Kaplan and Boston Fed president Eric Rosengren’s recent retirement announcements following reports that the two made investments while helping to set monetary policy, Daly said there’s “a collective sense of disappointment” that the situation is distracting her and her colleagues from their day-to-day work.