On Friday, June 28th local time, San Francisco Federal Reserve Chairman Daley stated that the latest inflation data shows that monetary policy is working, but it is still too early to determine when it is appropriate to cut interest rates.
Daley refers to the Personal Consumption Expenditures (PCE) Price Index, which is a preferred inflation indicator by the Federal Reserve. The long-term inflation target of 2% set by decision-makers is based on the core PCE data.
The data released by the US Bureau of Economic Analysis on Friday showed that the May PCE price index remained unchanged month on month, with a year-on-year increase of 2.6%, both in line with market expectations; After excluding volatile factors such as food and energy, the core PCE price index in the United States increased by 0.1% month on month and 2.6% year-on-year in May, both in line with market expectations.
"It's hard to imagine that monetary policy is not working anywhere. Our economic growth is slowing down, spending is slowing down, the labor market is slowing down, and inflation is decreasing. That's exactly the role of monetary policy," Daley said in a media interview
Looking ahead to future monetary policy trends, Daley pointed out that the Federal Reserve will continue to make decisions based on economic data, and if the rate of inflation decline is lower than expected, decision-makers will have to maintain high interest rates for a longer period of time.
Since July last year, the Federal Reserve has remained stagnant, with the federal funds rate target range maintained at 5.25% to 5.50%, the highest interest rate level in over 20 years.
Daley said, "On the other hand, if inflation rates fall at the rate they did at the end of last year and the labor market remains unchanged or experiences a recession, then we can adjust policies to address this situation." She added that it is still too early to draw conclusions now.
Daly has the right to vote on monetary policy this year. She warned on Monday that the US labor market is approaching a turning point, and further slowdown may mean an increase in unemployment rates as companies not only need to adjust job vacancies but also reduce actual job positions.