“We’re data dependent. When the data show what we need to see, then we will downshift,” Daly said Wednesday in an interview at Bloomberg headquarters in New York. “When the data don’t show it, then we’re going to have to keep doing what we’re doing.”
Hammering home the point, she added that it’s “really challenging” to slow the pace of policy tightening amid rising core inflation. Consumer price inflation excluding food and energy rose 6.3% in the 12 months through August, marking an acceleration from 5.9% in the 12 months through July. September’s data will be released on October 13. It will be preceded by the closely-watched monthly employment report on October 7.
“The American people – they need confidence that we’re resolute,” she said. If they see core inflation rising and the job market not cooling, “well, that’s not very comforting to the American people, and I think then that the downshifting on the tightening would be a much harder decision to make.”
The Fed has raised rates by three-quarters of a percentage point for three consecutive meetings and has signaled another 125 basis points of hikes at its remaining two meetings this year.
Chair Jerome Powell and his colleagues have been front-loading rate increases in an effort to bring inflation, which peaked at a 40-year high of 9.1% in June, down toward the Fed’s 2% target.
Daly said market anticipation of interest-rate cuts next year is misplaced, as the central bank aims to keep policy tight to secure 2% inflation.
“I don’t see that happening at all,” Daly told Michael McKee during a subsequent interview on Bloomberg Television when asked about the trajectory in futures pricing that suggests rate hikes followed by reductions.
Policymakers aim to boost the benchmark rate into “restrictive territory” and then “holding it there until we see inflation” truly get to 2%, Daly said. The Fed will be “staying the course” until the job is done, she added.