Mary Daly admits more hikes might be needed

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Mary DalyA series of crises have tarnished this past year, but the effects of inflation are still being felt today.

While it has decreased somewhat, the Federal Reserve is still on course to raise interest rates in order to handle the lingering issue.

Mary Daly, President of the San Francisco Fed, likewise underlined the importance of another rate hike.

The news

Mary Daly suggested on Saturday that the Federal Reserve should not only raise but also maintain interest rates at their current levels.

She claimed that doing so would enable them to deal with increased prices caused by inflation.

“There is more work to do,” said Daly at Princeton University.

“In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”

“Restoring price stability is our mandate, and it is what the American people expect. So, the FOMIC remains resolute in achieving this goal.”

Mary Daly also confessed that high inflation and the Fed’s aggressive rate hikes to bring prices down frightened Main Street and Wall Street.

“The responses range from fearing these actions will tip the economy into a recession to fearing they won’t be enough to get the job done.”

Concern triggered huge market volatility with the release of fresh economic data, as uncertainty encourages investors to seek quick remedies.

Yet, Daly feels that meeting the stated goal will take time and “a broader view.”

Nevertheless, Mary Daly remarked that given the volume and length of high inflation readings, the Fed’s current tightening policy was (and continues to be) fair.

Daly also calls the disinflationary trend into question, noting significant inflation in the goods, housing, and related sectors, as well as strong economic indicators.

Mary Daly is a member of the Federal Open Market Committee and attends policy meetings, but she does not currently vote on Fed policy.

Federal Reserve warnings

A week before Mary Daly’s speech, the Federal Reserve issued similar concerns.

Last Wednesday, Minneapolis Federal Reserve President Neel Kashkari remarked that he is open to the possibility of a bigger interest rate hike during the Fed’s March policy meeting.

“Whether it’s 25 or 50 basis points,” said Kashkari.

Likewise, Atlanta Fed President Raphael Bostic stated that the Fed’s policy rate should be hiked by half a percentage point at the next meeting.

The next day, Fed Governor Christopher warned that interest rates might climb quicker than planned.

He highlighted a sequence of economic numbers that were stronger than predicted.

Read also: Stock market ends February with losses

Interest rate progress

In the last year, the Federal Reserve has done a lot to keep inflation under control.

It raised its target range from near zero to 4.5% to 4.75%.

After cutting half a percentage point in December, they reduced increases to a quarter of a percentage point in February.

Inflation had reached a four-decade high in 2022, but it had started to fall in the last quarter.

Yet, January inflation data showed that the rate of price increases was steadily growing again.

Gold price

As a result of the new warnings, gold prices have come to a halt.

Prices dipped from a two-and-a-half-week high on Monday as traders anticipated US Federal Reserve Chair Jerome Powell’s decision for clues about future rate hikes.

On February 15, spot gold reached a high of $1,858.19 per ounce, but it is now down 0.3% at $1,849.33 per ounce.

Likewise, gold futures in the United States rose slightly to $1,855.10.

In addition, the dollar index increased 0.1%, making greenback-priced bullion more expensive for overseas buyers.

Awaiting testimony

Many people are looking forward to Powell’s congressional hearing on Tuesday and Wednesday, followed by the February jobs report due Friday.

“Currently, gold is in a wait-and-see mode,” said UBS analyst Giovanni Staunovo.

“There’s unlikely to be a change of script from Powell, reiterating the need for further rate hikes to bring inflation under control.”

While gold is frequently employed as an inflation hedge, rising interest rates may dampen demand for the zero-yielding commodity.

Mary Daly explored the possibility of interest rates climbing (and sticking there) if data on Saturday is hotter than expected.

According to Reuters technical analyst Wang Tao, current gold prices may continue to rise into the $1,867 to $1,876 per ounce region once resistance at $1,853 is breached.