(Reuters) – San Francisco Federal Reserve Bank President Mary Daly on Thursday said that while recent inflation data is moving in the right direction, more progress is needed before she would feel comfortable the Fed has done enough.
“Whether we raise another time, or hold rates steady for a longer period — those things are yet to be determined,” Daly said in an interview with Yahoo Finance. “It would be premature to project what I think would happen because there’s a lot of information coming in between now and our next meeting.”
Daly spoke a couple hours after the U.S. Labor Department reported that underlying consumer price inflation moderated in July, with the core CPI, which excludes food and gas prices, rising 4.7% from a year earlier, after a 4.6% increase in June.
The Fed targets 2% inflation.
While goods inflation is receding, and newly signed lease trends signal inflation from housing will also cool, core services inflation excluding housing has so far made little progress, Daly said.
“We do need to see that come back to prepandemic levels if we’re going to be confident that we can get to 2% on a sustainable basis,” Daly said. “I’m going to need to see some traction in getting there before I feel comfortable that we’ve done enough.”
The Fed raised its policy a quarter of a percentage point last month, to a range of 5.25% to 5%, and policymakers will consider whether to raise rates further when they meet again in September, November and December.
Traders are betting they won’t.
Daly before the most recent rate hike had thought a total of two more interest-rate increases would likely be needed before year’s end, but she did not reiterate that view on Thursday.
She did note that inflation is still a key worry for people she talks with, and that volatile oil prices and worries about a possible resurgence in housing inflation were important information for her as she considers next steps. She also said the economy is slowing, but that job gains still far exceed what would be needed just to keep up with population growth.
“I was very supportive of the rate hike we took and I’m very supportive of not prematurely projecting what we’ll be doing,” she said.
She said the conversation is a “long way” from a focus on the possibility of rate cuts, though she expects it will be time for those questions next year.
(Reporting by Ann Saphir; editing by Jonathan Oatis)
