Below is an excerpt from an interview with Federal Reserve President and CEO Mary Daly. It's a copy. Bank of San Francisco airing on "Face the Nation" on Sunday, August 7, 2022.
Margaret Brennan: Back to the state of the economy and Mary Daly, President of the Federal Reserve Bank of San Francisco. good morning.
Federal Reserve Bank of San Francisco President Mary Daly: Good morning.
Margaret Brennan: The San Francisco Federal Reserve has decided that fiscal spending during the entire period of the pandemic, all congressional funding will be her 3% - her 3% rise in inflation. Do you think the Congress bill about to be passed will also accelerate inflation?
DALY: Now, remember that during the pandemic, while there was this fiscal relief, there was also monetary policy easing. And they were what we needed to survive the pandemic. That's why it's been such an important factor in history that it comes down to determining whether it's too much or too little...but now that's where it was. And my staff appreciated it. Looking ahead, there is so much happening in the economy right now, both domestically and globally. And we are suffering from high inflation. But the Fed is committed to lowering it. And we look not just at what Congress has passed, but at what's happening around the world.
Margaret Brennan: So do you think this bill will lead to inflation? Inflation has peaked. can you say that
Daily: As you know, we cannot comment on pending legislation. We can't say for sure as all the details have yet to be worked out or the timeframe these things will take place. So, Margaret, I think the most important thing right now is that inflation is too high and the labor market is strong. The global economy is suffering from ongoing high inflation and that's what I'm looking at.
Margaret Brennan: You are a labor economist. We had this surprisingly strong employment number on Friday. Why was it so amazing? What did the economists miss here? what was your main point?
Daily: Very interesting. You know, it surprised everyone trying to figure out exactly what the numbers would be. And, as you know, a lot of the predictions were off nicely. But frankly, when I go out to a community or travel somewhere, I just go to my community. I don't think companies are that surprised that consumers are workers. There are signboards with application requirements everywhere. People can find multiple jobs if they want. Looking for a job doesn't take long. So I think the labor market continues to do well. It tells us that people want to work and want to hire. But the universal truth is that inflation is too high.
Margaret Brennan: But is the recession still here, or is it a sign that the recession is not what it is now or what it will be?
Daily: You don't feel like you're in a recession if the economy is going bad. That's the conclusion. The most important risk is inflation. And I think the job market just backs it up.
Margaret Brennan: Okay. We are taking a break and will be back with you soon. Mary Daly, please stay with us. I have more questions.
*COMMERCIAL BREAK*
Margaret Brennan: Welcome to Face the Nation. Continuing our conversation with Mary Daly, President of the Federal Reserve Bank of San Francisco. That employment number on Friday also found that wages rose, but not as fast as inflation, which is really getting baked into the economy and that our Fed colleagues will have to keep raising rates.
Daily: You know, I don't think inflation is built into the economy. Because the things we worry about aren't easy to fix. What I see is that demand and supply are not balanced. According to my own staff estimates, about 50% of excess inflation is demand related. We supply the remaining 50%. The Fed is in a very good position to bring down demand and we are already seeing a cooling in the housing market and investment. So there are signs that the economy is cooling. It will take some time for the interest rate adjustments that we have made to work. And we're not done yet. That is our promise to the American people. We're not done yet. We are committed to keeping inflation under control and will continue to work until the job is done.
Margaret Brennan: So it is still appropriate for him to raise interest rates by 0.5% in September.
Daily: Of course. And you have to rely on your data. done. we need to keep an open mind. Two more inflation reports, another employment report will be released. We continue to gather all the information from the context we are talking about to see how this is working through the economy. A little over 5%. The last print is 9.1%. Americans are losing ground on a daily basis. So we need to focus on keeping inflation down.
Margaret Brennan: One thing the Fed cannot control is geopolitical risk. How concerned are you about what is currently happening in the Taiwan Strait?
Daily: There's so much going on in the world that I think it's really something to think about. We're just getting through COVID so that new variants don't derail economic activity. Central banks around the world are raising interest rates to curb their own inflation. And there are ongoing developments geopolitically or more generally between countries and all of them. The war in Ukraine, all of this creates headwinds for the U.S. economy that must be relied upon for growth while keeping inflation in check.
Margaret Brennan: Work on the Federal Reserve Board has been suspended, and I think we will talk about it again. Thank you very much, Mary Daly.
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