“I can make arguments for either option. The Fed should be as gentle as it can in trying to bring inflation down, but at the same time make absolutely sure that hyperinflation won’t ossify,” Daly said in an interview published Monday.
Daly said he expects the central bank to raise interest rates above 5 percent before pausing, although the exact level is uncertain and depends on incoming inflation data. Daly also emphasized that he thinks that the policy rate, which is currently 4.25-4.50 percent, should go to 5.0-5.25 percent and stay there in order to bring inflation down.
Daly, who mentioned that the information will determine how high the interest rate should go, said that the unemployment rate in the USA, which is currently 3.5 percent, will increase to 4.5 or 4.6 percent, and the inflation, which is currently 5.5 percent, will increase to 3 percent by the end of 2023. He also said that he expects him to regress to the band.
While the Fed slowed the rate of increase in interest rates at its December meeting, he emphasized that additional tightening would come to bring inflation to the central bank’s 2 percent target and that borrowing costs could remain at higher levels for a while.
