Fed’s Daly Says Inflation Will Moderate and Hike Rates Premature

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Nov 10 (Reuters) – San Francisco Federal Reserve Bank President Mary Daly said on Wednesday that she expects inflation to moderate once COVID-19 recedes, repeating that it would be “quite premature” to raise rates. rates now or even accelerate the Fed’s reduction of bond purchases.

“The uncertainty forces us to wait and watch carefully,” Daly said in an interview on Bloomberg TV.

In a nod to the economic progress made since the first COVID-19 vaccines went live late last year, the Fed began cutting its monthly bond purchases last week in a downsizing process that is expected to last until the middle of next year.

Interest rate hikes are expected to begin once the reduction in bond purchases has been completed, as a slight majority of the Fed’s policy makers in September considered that they should not start before 2023 .

This deadline is drawing criticism from some sectors, as it could put the US central bank behind in the fight against inflation.

Consumer prices in the United States rose 6.2% in October compared to the previous year, the fastest annual rate in 31 years, according to a government report.

This is high inflation, Daly said, and painful, but it is being driven by supply chain bottlenecks and high consumer demand for goods, which will pass as COVID-19 fades. . Similarly, the job offer is limited by the fears and impact of COVID-19.

The Federal Reserve’s monetary policy cannot affect supply problems, Daly said, and tightening policy now could increase the cost of investments and slow progress in resolving bottlenecks.

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(Reporting by Ann Saphir, Edited in Spanish by Gabriela Donoso)

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