Fed Pres. Mary Daly (2027 voting member) on CNBC and says:
- One month of data is decisional
- right now inflation is above target. It’s a balance of risks calculation.
- Hope last year’s rate cuts would put a floor under job market, but this report has my attention.
- With oil prices increasing the question is how long will that last.
- Fed cannot look through this report, but it’s just one month of data.
- If breakeven is 30K, we are below that, but it’s only a couple months of data.
- Wages need to be inflation plus productivity growth which is higher
- this wage growth is not a sign of frothiness
- Worried labor market is weaker than we have seen.
- There are 2 sided risks.
- Oil price shock is a real thing, consumers will feel that.
- Labor market gives me some concern, but strikes, snow, population benchmarking make report harder to interpret.
- Need more time to decide.
- Little optimistic that AI will help drive productivity, but need to see it.
- Another policy alternative is to hold rates steady.
- Not in a position to think we should hide.
- There is a real issue if we should act immediately on labor market, or weight.
- We have to be steady in the boat while we collect more information.
- Have not seen evidence economy is running hot.
Bottom line: Daly signaled caution and patience, acknowledging labor market concerns but stressing the need for more data before adjusting policy.
Below are the comments by topic:
Inflation
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Inflation is still above the Fed’s target.
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Policymaking right now is a balance-of-risks calculation.
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Rising oil prices could pose an inflation shock, and consumers will feel the impact if the move persists.
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Wage growth is not showing signs of frothiness and should ideally equal inflation plus productivity growth, which has improved.
Labor market
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The latest employment report has her attention, raising concerns the labor market may be weaker than previously thought.
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If the breakeven pace of job growth is around 30K, the latest reading came in below that level.
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She is worried the labor market could be weaker than it appears.
Interpreting the jobs report
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One month of data is not decisive, though it cannot be ignored.
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Temporary distortions such as strikes, snow, and population benchmarking revisions make the latest report harder to interpret.
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The Fed needs more time and additional data before drawing firm conclusions.
Monetary policy outlook
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The Fed cannot ignore the latest report, but policy decisions should not be based on a single data point.
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There are two-sided risks to the outlook.
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One policy option would be to hold rates steady while gathering more information.
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The Fed must remain steady while assessing incoming data.
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Policymakers are not in a position to react immediately to labor market weakness without further confirmation.
Growth and productivity
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She has not seen evidence that the economy is running hot.
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There is some optimism that AI could boost productivity, but it remains too early to be certain.
This article was written by Greg Michalowski at investinglive.com.
