“The risks of under-tightening vs over-tightening are about balanced,” Daly said during a live-streamed event. “Two more rate hikes this year are a very reasonable projection.”
Daly’s comments come in the wake of Fed Chair Jay Powell’s testimony to Congress this week that nearly all policy-makers at the central bank wanted more rate hikes to curb inflation. Powell’s remarks signaled the June pause of the Fed's yearlong campaign of monetary tightening was just that — a pause.
The Fed’s next decision on rates will be on July 26. Many economists predict it will add another quarter percentage point at that meeting to rates, bringing them to a peak of 5.5%, as it tries to further tame inflation.
Daly said she backed the Fed’s June rate pause but was of the opinion that the central bank needed to do more to fight inflation as the year progressed.
“I strongly supported [the] June decision to stand pat on rates and watch the data. Two more rate hikes is only a projection and we don't know for sure.”
The Consumer Price Index, the broadest gauge for US inflation, grew by 4% in the year to May, expanding at its slowest pace in more than two years. The Personal Consumption Expenditures Index, the Fed’s preferred inflation gauge, meanwhile, grew by 4.4% in the year to April. Both are, however, at least twice above the Fed’s 2% target for annual inflation.
The central bank, in response, has raised rates by 5% since the end of COVID-19 outbreak in March 2020.