Fed is facing one of its most aggressive campaigns of raising interest rates in decades.
Is US central bank entering a new phase of policy tightening in 2022?
1/ Mary Daly, president of the San Francisco branch is among officials to back a slower pace of rate rises.
2/ This is because it takes months for the full effect of policy adjustments to be felt. And even more time to show up in the economic data. 'This next phase of policymaking is much more difficult because you have to be mindful of so many things...' she said.
3/ “You have to be mindful of the cumulative tightening that’s already in the system, the lags in monetary policy, the risks that are all throughout the global economy, and the tremendous uncertainty that we have even about what the evolution of inflation is going to be.”
4/ Daly said the Fed was focused on how long to keep the policy rate at a restrictive level.
“If I can hold it there [at an elevated level] for a year and think that inflation is coming down, then that’s probably a reasonable rate to stop at,” the San Francisco chief said.
5/ According to Daly drawing distinctions between monetary and financial stability tools “can be done, but it makes for some very challenging communications”.
6/ When asked about cryptocurrency, Daly said the central bank is paying attention to where “cross-contaminations” can emerge between companies and institutional investors, but right now does not see a big risk to financial stability, with people reducing their exposure.