Fed’s Daly Doesn’t See Staflations Signals
22 minutes ago
San Francisco Federal Reserve President Mary Daly said there is no evidence to suggest “stagflation,” though central bankers do need to keep an eye on the labor market.
At a Commonwealth Club World Affairs of California event, Daly said the Federal Reserve could encounter several different economic scenarios as it continues to hold interest rates at decades-high levels, including a “soft landing” scenario where inflation falls without sending unemployment higher.
“We need to be ready to respond to however the economy evolves,” Daly said.
As inflation data has shown that price pressures have begun to ease in 2024, Daly said Fed officials will also need to closely monitor the labor market, stressing that high interest rates are starting to have a bigger impact on unemployment.
“Future labor market slowing could translate into higher unemployment, as firms need to adjust not just vacancies but actual jobs,” Daly said.
However, the labor market so far remained strong, Daly said, which along with the progress on inflation made it unlikely that the U.S. economy would enter a period of stagflation where unemployment rises as inflation remains elevated.
“We don’t see evidence that those, what I would call tail risks, are really in our future,” Daly said. “When you look at the information, you see an economy that is quite different from a stagflation economy.”
-Terry Lane
Goolsbee Sees Inflation Progress as Rents Cool
2 hr 49 min ago
A cooling housing market could be good news for inflation, as central bankers will be looking for more signs rents are coming down, Chicago Fed President Austan Goolsbee said in a CNBC interview on Monday.
His comments come ahead of the Friday release of the Personal Consumption Expenditures (PCE) price index, where officials and investors will be closely watching for signs that inflation is moving lower.
“I take it as a good sign that market reactions are often biggest when the data comes out, not when we make statements. To me, that’s an indicator that we’re doing the communications the right way,” Goolsbee said.
For his part, Goolsbee said he was closely watching numbers from the housing market, and especially focusing on inflation rates for rent, which have moved “significantly” lower but haven’t yet shown up in inflation data.
“There is still wide availability that housing inflation can come down,” he said.
Goolsbee also said if unemployment continued to trend higher and if consumer spending cooled, then Fed officials may begin to evaluate cutting interest rates.
“If you’re going to be extra restrictive for too long then you’re going to start to have to worry about what’s going on with the real economy,” Goolsbee said.
-Terry Lane
