Federal Reserve Bank of San Francisco President Mary Daly on Monday noted that if the Federal Funds rate was to reach 1.25% by the end of the year, that would be quite a bit of tightening but still supportive of the economy. Presumably, she is talking about the possibility of five 25bps rate hikes in 2022 to take the Federal funds target range to 1.25-1.50% by the year’s end. The fact that she (as one of the Fed’s more dovish policymakers) points out that, even after five hikes, the level of interest rates would still be economically supportive could be seen as a nod of approval by Daly to market expectations for five hikes this year. 

Additional Takeaways:

“Our two goals feel somewhat in tension.”

“Inflation is too high, and labor market for disadvantaged groups is stronger than it has been in a long time.”

“It’s time to adjust the policy rate to get the economy on a sustainable path.”

“I don’t want to be too quick to declare victory on full employment.”

“I am completely comfortable with making interest rate adjustments in 2022, but open about 2023.”

“You could pretty much use any averaging period you want and the Fed would be meeting 2% inflation on average.”

“We still have an aging population, slower productivity growth and lower neutral rate of interest that are putting downward pressure on inflation in the medium run.”