Fed’s Daly: Inflation reins the US economy

On Tuesday, San Francisco Federal Reserve Bank President Mary Daly said she believes the US economy will slow to below 2% annual growth as the central bank hikes interest rates, but there will be enough momentum that it will not stop growing.

“I do expect the unemployment rate to rise slightly, but nothing (like)…. what people would think of as a recession,” Daly said in an interview on LinkedIn.

Key Quotes

The fed can address inflation, at least partly.

Supply is still very short, made shorter by war in Ukraine.

Fed can reduce demand, which is about half of the cause of inflation.

Inflation bridles the economy.

getting price stability is a fundamental factor in achieving full employment.

The labor market is really strong right now.

The economy has a lot of momentum, that puts us in a better position of achieving a softer landing.

We will have slower growth, perhaps below 2%, but it won’t be negative.

Expect unemployment rate to rise slightly, but not like in a recession.

We are tapping on the brakes to get to a more sustainable pace.

Global economy won’t grow as fast because of Ukraine, and that will be a headwind for the u.s. economy.

Consumer and small business sentiment show pervasive effect of inflation.

I’m worried that left unbridled inflation would continue to threaten US economy.

It is tough right now, but it will get better in part because of fed rate hikes, and signs of life in supply chains.

Mass layoffs in tech are not only related to slowing in the economy; tech is always repositioning itself.

Labor market is strong right now, despite layoffs; if you are in tech, you’ll be able to continue to get jobs.