San Francisco Fed President Mary Daly, in an interview with Germany’s Börsen-Zeitung newspaper, expressed confidence in the current state of monetary policy, stating that “policy is in a very good place” as Fed has “raised the key interest rate significantly.”

She further mentioned, “We don’t need an insurance mentality now, where we hedge against rising inflation. We should simply be patient and remain vigilant.”

Regarding future rate adjustments, Daly clarified, “I’m not thinking about rate cuts at all right now.” She emphasized her current focus on evaluating whether the current level of monetary tightening is sufficient to restore price stability.

Daly also provided an optimistic view of the economy, noting, “Our inflation data are improving and our real economy has not stalled.” She added, “I don’t see a recession on the horizon at the moment.”

The latest Fed’s Beige Book report indicates general slowdown in economic activity, with variations across different regions. Specifically, four districts reported “modest growth”, two districts experienced “flat to slightly down”, and six districts observed “slight declines” in activity.

This mixed picture reflects the diverse economic conditions across the country and points to a cautious economic outlook for the next six to twelve months, which is perceived to have “diminished” during the reporting period.

In terms of labor market dynamics, demand for labor “continued to ease”. Most districts reported either flat or modest increases in overall employment. Wage growth across most districts was characterized as “modest to moderate”. Notably, the report highlights “easing in wage pressures”, with several districts even reporting declines in starting wages. This trend could be a response to the overall economic slowdown and a signal of less competition for labor.

Regarding prices, the report notes a general moderation in price increases across districts, although prices remain at elevated levels. The expectation is for “moderate price increases to continue into next year”.

Full Fed’s Beige Book report here.

Cleveland Fed President Loretta Mester, in her remarks at a conference overnight, acknowledged that while inflation remains above Fed’s 2% target, there has been “discernible progress” in controlling it, even as the “overall economy has remained relatively strong”.

Mester expressed confidence in the current stance of monetary policy, stating, “Monetary policy is in a good place for policymakers to assess incoming information on the economy and financial conditions.”

Highlighting the need for flexibility, Mester described the central bank’s rate policy as needing to be “nimble,” and she believes that “the current level of the funds rate positions us well to do that.”

Mester did not rule out the possibility of further rate hikes, emphasizing that the decision to increase rates further and the duration for which the rate target remains high “will depend importantly on whether the economy is evolving as expected, how the risks are changing, and the progress being made on our dual mandate goals of price stability and maximum employment.”