[Fed] Two Officials Disagree on "Maintaining Restrictive Monetary Policy"

Remarks of Officials

Summary:

Daly's speech was full of dovish sentiment, indicating that he was prepared to take action based on the data. Kashkari, on the other hand, believes that it is necessary to continue to maintain high-interest rates.

On March 6, local time, Mary Daly, President of the San Francisco Federal Reserve, said in her speech that the shortage of housing inventory led to high housing prices, and the rising housing prices were the key driver of inflation. The Fed was committed to achieving price stability.

There is no urgency to cut interest rates given the current overall dynamics of the economy, including a strong labor market, consumer spending, and economic growth. Although restrictive monetary policy has led to higher housing costs, this policy is temporary, and keeping interest rates high for an extended period will cause unnecessary damage to the economy. The Fed is ready to act and make adjustments based on the data.

On the same day, Neel Kashkari, president of the Minneapolis Federal Reserve, said that the basic prospect at present is not to raise interest rates. If inflation is more stubborn than the Fed expected, the Fed will first extend the time to maintain restrictive monetary policy; If it is reversed by inflation, it may prove that raising interest rates is reasonable.

Based on the economic data released so far, it is expected that the Fed will only cut interest rates twice or only once this year, and the decision to cut rates will still depend on the upcoming inflation data. If the economy remains strong and develops healthily, perhaps a continuation of the current restrictive monetary policy is also possible.

The positions of the two officials are totally different. Daly thinks that restrictive monetary policy is only temporary, while Kashkari thinks that if the economy remains strong, it is not necessary to maintain restrictive monetary policy for a longer period.

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[Fed] Two Officials Disagree on "Maintaining Restrictive Monetary Policy"

Risk Disclosure