Fed’s Daly: Strong economy can tolerate 50-point hikes

(Bloomberg) — Federal Reserve Bank of San Francisco President Mary Daly backed raising interest rates by half a percentage point at each of the next two central bank meetings, adding that she would like to see a further tightening of financial conditions.

“Going up in 50 basis point increments makes a lot of sense to me and there is no reason right now in the economy to pause going up for the next two meetings,” Daly said Thursday in an interview with Bloomberg News.

He added that a 75 basis point increase, which has been the subject of speculation as an option to curb rising inflation, «is not one of the main considerations.»

Central bankers raised the federal funds rate by half a percentage point, to a range of 0.75% to 1%, at a meeting earlier this month. It was the first increase of that size since 2000, as the Fed struggles to contain the biggest increases in consumer prices in 40 years.

«I expect financial conditions to tighten further as we go through these rate hikes and remove stimulus from the economy,» Daly said. “I think we are already off to a good start, but I would like to see continued tightening of financial conditions, that would be consistent with the balance between supply and demand.”

Daly said rates should rise to a neutral level by the end of the year, estimating the rate to be around 2.5%.

original note:

Fed’s Daly Says Strong Economy Can Tolerate 50-Basis-Point Hikes

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