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Fed's Daly says expect a 'dose of patience' on interest rates

Economy Mar 24, 2021 04:20PM ET
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© Reuters. FILE PHOTO: San Francisco Federal Reserve Bank President Mary Daly poses in San Francisco

By Ann Saphir

(Reuters) - San Francisco Federal Reserve President Mary Daly on Wednesday said the U.S. central bank won't be taking the "punch bowl" preemptively from the economy as the recovery gains momentum and unemployment falls.

The Fed will use a "dose of patience" and will not get "overly joyous" as the jobless rate falls, Daly said at a virtual event held by Northeastern University. "We are not going to take this punch bowl away."

Critics worry that leaving interest rates low for too long could bring on higher inflation.

Daly said the specter of high inflation is not a fear the Fed should be reacting to: over the past 20 years, and projecting forward to the next decade, the risk is that inflation runs too low rather than too high, she said.

The Fed has pledged to keep its benchmark overnight lending rate at the current near-zero level until the economy reaches full employment, inflation hits 2%, and is projected to run above the level for some time. Fed forecasts suggest most policymakers believe that will take at least through 2023.

Interest rate futures reflect investor skepticism that rates will stay low that long.

Though Daly didn't specifically address when she expects the Fed will start raising rates, she made it clear there is no rush.

"We are committed to leaving the monetary policy accommodation in place until the job is fully and truly done," she said.

Fed's Daly says expect a 'dose of patience' on interest rates
 

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Comments (4)
Zach Lohman
Zach Lohman Mar 24, 2021 6:05PM ET
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Or we could, you know, let the market set rates.
Ten Centz
Ten Centz Mar 24, 2021 4:47PM ET
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Blah blah blah nyquil joe , old yeller , ban bitcoin ! Pay more tax on stocks ! Yes ! This will fix america from that evil evil trump!
Raksaksa Tonne
Raksaksa Tonne Mar 24, 2021 4:45PM ET
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spoken like a true and shameless debaser of the market
peter neal
peter neal Mar 24, 2021 4:41PM ET
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They are going to leave monetary policy accommodative until the job is truly done.... I believe they will.
 
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