San Francisco Federal Reserve Bank President Mary Daly said Monday she wants central bankers to keep an open mind when they gather in June to decide what to do with interest rates at that meeting and at the other four policy meetings scheduled for this year.
“I really think at this point in our tightening cycle, it is prudent to resist the temptation to say what we’re going to do for the rest of the year,” Daly said during a discussion at the International Economic Symposium hosted by the Bank of France and the National Association for Business Economics.
The best policy for the Fed now “is about extreme data dependence and policy optionality,” Daly added. Under these principles, it is a distraction to focus on what the Fed is going to do in June and for the rest of the year.
“The data should direct what we do,” Daly said.
Fed officials are locked in a debate over whether to again hike interest rates at the June meeting or to pause after 10 straight meetings with a hike. Some officials are using the term “skip” to underline that a pause is not necessarily a stop.
Earlier on Monday, St. Louis Fed President James Bullard advocated more rate hikes.
The Fed’s benchmark rate is now in a range of 5%- 5.25%. The median forecast of Fed officials, released in March, said this level would be the peak rate in this cycle.
Daly said the Fed has to balance the risk of overtightening versus undertightening interest-rate policy.
“If we’ve tightened too much, we can easily create an unforced error,” she added.
Stocks
DJIA,
SPX,
were mixed in Monday trading. The yield on the 10-year Treasury note
TMUBMUSD10Y,
has been rising steadily and hit 3.72% Monday, the highest level since early March.
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