Fed likely to need to raise rates with worsening inflation: Daly
TLT•San Francisco Fed President Mary Daly said she is biased toward raising rates, citing worsening services inflation and signs that producers may pass higher costs to consumers. Core CPI rose about 0.3% month over month in each of the last three months.
1. Daly favors rate increases
Mary Daly said her bias is that the Federal Reserve will likely need to raise its policy rate, with the decision to be discussed with colleagues at the December meeting and future meetings. She said producers increasingly want to pass higher costs to consumers as they run out of room to absorb them in margins.
2. Services inflation concerns
Core consumer prices rose about 0.3% month over month in each of the last three months, above the 0.2% or less pace consistent with the Fed’s 2% annual inflation target. Daly said services inflation excluding housing is moving in the wrong direction and is concerning because it tends to be sticky.
3. Consumer spending watched
The Fed held rates steady in October after raising them in September. Daly said she is watching consumer spending over the next one to three months, including the holiday season, and noted reports that consumers may be running out of gas.
