San Francisco Fed chair supports holding interest rates steady

By Ovunc Kutlu

ISTANBUL (AA) - The head of the San Francisco Federal Reserve Bank said Thursday she supports holding interest rates steady.

"If we continue to see a cooling labor market and inflation heading back to our target, we can hold interest rates steady and let the effects of policy continue to work," Mary C. Daly said in her speech at The Economic Club of New York.

"Importantly, even if we hold rates where they are today, policy will grow increasingly restrictive as inflation and inflation expectations fall. So, holding rates steady is an active policy action," she added.

Daly said if financial conditions remain tight, the need for the central bank to take further action would be diminished.

If, however, financial conditions loosen too much, the Fed can react and raise interest rates further until it is confident that monetary policy is sufficiently restrictive to complete the job of lowering inflation, she added.

"While overall inflation has fallen a lot, it continues to be almost 2 percentage points higher than our target," Daly noted.

The Fed made 11 rate hikes since March 2022 to tame record inflation but the moves also risked pushing the US economy into a recession.

Although the bank on Sept. 20 skipped an interest rate hike for the second time this year, it expects an additional rate hike in one of its two remaining meetings before the year's end, while it indicated fewer rate cuts for next year, according to its projection materials.