Federal Reserve uncertain whether inflation on track to 2% goal: Mary Daly

Although inflation has declined considerably since its peak in June of last year, the Federal Reserve is unsure whether it’s on a path to their 2% objective, San Francisco Fed President Mary Daly said Friday. In other words, it’s too early to declare victory on the inflation battle.

“At the Federal Reserve, we are not certain whether inflation is on track to return to 2%,” Daly said in prepared remarks at the Frankfurt European Banking Congress. “We are unsure about the length of policy lags and whether they are behind us or still to be fully realized.”

Other uncertainties that cloud the inflation outlook include the neutral rate of interest, or the rate at which monetary policy is neither bolstering nor restricting economic growth, as well as the overall economic forecast, she noted.

Daly, who will be a voting member of the rate-setting Federal Open Market Committee next year, highlighted the importance of not acting quickly when it comes to monetary policy. “When uncertainty is high and the risks to our objectives more balanced, we need to practice gradualism.”