San Francisco Fed Pres. Mary Daly: No one month of data is decisional

Fed Pres. Mary Daly (2027 voting member) on CNBC and says: One month of data is decisionalright 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 higherthis wage growth is not a sign of frothinessWorried 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:InflationInflation is still above the Fed’s target.Policymaking right now is a balance-of-risks calculation.Rising oil prices could pose an inflation shock, and consumers will feel the impact if the move persists.Wage growth is not showing signs of frothiness and should ideally equal inflation plus productivity growth, which has improved.Labor marketThe latest employment report has her attention, raising concerns the labor market may be weaker than previously thought.If the breakeven pace of job growth is around 30K, the latest reading came in below that level.She is worried the labor market could be weaker than it appears.Interpreting the jobs reportOne month of data is not decisive, though it cannot be ignored.Temporary distortions such as strikes, snow, and population benchmarking revisions make the latest report harder to interpret.The Fed needs more time and additional data before drawing firm conclusions.Monetary policy outlookThe Fed cannot ignore the latest report, but policy decisions should not be based on a single data point.There are two-sided risks to the outlook.One policy option would be to hold rates steady while gathering more information.The Fed must remain steady while assessing incoming data.Policymakers are not in a position to react immediately to labor market weakness without further confirmation.Growth and productivityShe has not seen evidence that the economy is running hot.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.

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