Fed’s Mary Daly: Inflation Isn’t ‘Embedded’ In US Economy

Fed's Mary Daly: Inflation Isn't 'Embedded' In US Economy Fed's Mary Daly: Inflation Isn't 'Embedded' In US Economy (Louis Ko | Dreamstime.com)

By Fran Beyer | Sunday, 07 August 2022 01:55 PM EDT

President of the San Francisco Federal Reserve Bank Mary Daly on Sunday insisted inflation isn’t “embedded in the economy” — and vowed the Fed would continue efforts to reign it in.

In an interview on CBS News’ “Face The Nation,” Daly said the current high prices have their roots in a supply and demand disparity — and the Fed is “far from done” in addressing the problem.

“I don't see inflation is embedded in the economy, the kinds of things that we would worry about just not being able to correct easily,” she said.

“What I see is supply and demand are just unbalanced. About 50% by my own staff's estimates of the excess inflation we see is related to demand. The other 50% to supply.”

According to Daly, the Fed is “really well positioned to bring demand down, and we already see the cooling forming in the housing market and investment.”

“So I do see signs that the economy is cooling,” she said. “It just is going to take some time for the interest rate adjustments we've made to work their way through. And we are far from done yet. That's the the promise to the American people. We are far from done. We're committed to bringing inflation down and we'll continue to work until that job is fully done.”

Daly noted central banks across the globe are raising interest rates “to try to bridle their own inflation.”

“And we have ongoing developments that take place geopolitically or just more generally among countries,” she added.

“The war in Ukraine, all of those things create headwinds for the U.S. economy and we're going to have to lean against those headwinds for growth while we bridle inflation,” she said.

Daly pointed out that despite good job numbers, “the universal truth” is that inflation is still too high and the Fed is focused on bringing it down.

“I think the most important thing is that inflation is too high and the labor market is strong,” she declared. “The global economy is struggling with ongoing high inflation, and that's what I'm focused on.”

“I don't think consumers [or] workers or businesses were that surprised” by the strong jobs picture, she added.

“There's help wanted signs all over the place. People can find multiple jobs if they want them. Search times for jobs aren't that long. So I think the labor market is continuing to deliver.”

“It just tells me that people want to work and that people want to hire,” she said. “But the universal truth is that inflation's too high.”

“If you're out in the economy, you don't feel like you're in a recession,” she said. “That's the bottom line. The most important risk out there is inflation. And I think the job market just confirms that.”

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