Federal Reserve Bank of San Francisco President Mary Daly
- Any guidance on policy would be speculative and wrong, given uncertainty
Earlier:
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I don’t even know where to start with that comment.
OK … here goes.
I am not expressing an opinion on what I think the Federal Reserve should do right now. Cut or not cut.
More generally, given the level of uncertainty Daly is expressing here, what should a central bank do? here goes …
1. There is always uncertainty.
2. Right now its much higher than usual. Much higher, although since the tariff ceasefire between the US and China is dialled back a little.
3. If it’s a time of extreme uncertainty, its not just the central bank that’d be feeling uncertain, but main street business and households probably even more so.
4. If uncertainty is so high as to lead to paralysis in giving forward guidance then I reckon the correct response is a rate cut. Or, if not that, then dovish talk, to ease concerns, at the margin. Ease financial conditions to give main street more room to move.
Comments welcome.
This article was written by Eamonn Sheridan at www.forexlive.com.
