In light of the recently released consumer inflation data for July, San Francisco Federal Reserve President Mary Daly cautions against premature celebration of a victory over inflation. Despite the positive news for families and businesses indicated by the Consumer Price Index (CPI) data, Daly emphasizes that there is still work to be done.
Gradual Progress in Taming Inflation
Daly acknowledges that the CPI data is consistent with a gradual decline in inflation. However, she emphasizes that inflation continues to be the top concern raised by the individuals she interacts with. While the data is encouraging, she stresses that it does not necessarily indicate that victory has been achieved.
The Road to Controlling Inflation
In an effort to curb inflation, Federal Reserve officials aim to increase interest rates. The plan is to reach a level where inflation is subdued and then maintain rates at that level as inflation continues to decline. However, determining the exact level of rates required to achieve this goal remains uncertain for the central bank.
Uncertain Rate Hike Plans
Following a 25 basis point increase at the end of last month, raising the benchmark rate to a range of 5.25%-5.5%, it remains unclear whether another rate hike will be proposed at the September meeting. Daly emphasizes that there is a considerable amount of time between now and September, implying that the decision will be made after careful evaluation.
Future Plans and Influence
The Federal Reserve’s interest-rate committee will convene at the end of September to update their plans. It is worth noting that Mary Daly will become a voting member of the committee next year. Analysts attribute the decline in U.S. stocks immediately following the release of the CPI data to Daly’s comments.