San Francisco Fed President Mary Daly noted overnight that the risks of over-tightening versus under-tightening are currently “roughly balanced”.
The tightening of financial conditions, as indicated by surging treasury yields, may influence the extent of Fed’s policy adjustments.
Daly noted, “If that’s tight, maybe the Fed doesn’t need to do as much. That’s why I said, depending on whether it unravels, or whether the momentum in the economy changes, that could be equivalent to another rate hike.”
However, Daly remains watchful, indicating that depending on economic momentum and other variables, “that could be equivalent to another rate hike.”
Beyond domestic considerations, Daly expressed concerns about “geopolitical uncertainty,” noting its potential impact on the US economy.
The repercussions of international events on elements like oil prices and export demand are being closely monitored by the Fed. She encapsulated the Fed’s vigilant stance by stating, “It’s part of a large dashboard of data”
