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Comment: San Francisco’s Daly does not want to set policy based on hypotheticals, watching data, markets, and business mood

San Francisco Fed President Mary Daly is in Asia this week. Her scheduled speech on Monday at the Symposium on Asian Banking and Finance in Singapore did not directly address monetary policy, Naturally, her Q&A and other appearances such as on CNBC’s Street Signs drove straight to the point: where were her views on a possible rate cut?

Daly was clear that she is “vigorously” watching the economic data and mood of contacts in the business community. She stressed that she does not want to make policy based on “hypotheticals” but rather on solid information. She agreed that at present the risks are elevated, but also said that until the extent of the risks like Brexit, global slowing, and trade tariffs on goods imported to the US are known and understood, she is prepared to wait and see.

Day wants to avoid “front running a decision” on rates. She is listening for “persistent uncertainty” rather than focusing on short-term reactions.

While she acknowledged that an inversion of the 2-year/10-year yield curve is a solid indication of a downturn in economic activity, she did say the recent brief inversions lacked the “deeper magnitude and more persistent” characteristics of a signal of a deterioration in economic conditions. She thought that markets are reacting to uncertainty and slower expansion even as the economy remains fundamentally good.

Daly is a relative newcomer on the FOMC since she took over as President at the San Francisco Fed in October 2018 and was immediately in the 2018 rotation of FOMC voters. So far, she has proven to be one of the centrists on the Committee and remains among the consensus who are patient on the policy outlook. This year she is a nonvoter.


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