The Globe and Mail reports in its Thursday, Oct. 6, edition that San Francisco Federal Reserve president Mary Daly on Wednesday underscored the Fed's commitment to curbing inflation with more interest-rate hikes, even as she said the Fed will not simply barrel ahead if the economy starts to crack. A Reuters dispatch to The Globe reports that
Ms. Daly told Bloomberg TV in an interview: "We definitely don't raise rates until something breaks. We actually are forward-looking." She added that policy makers do not rely only on models but gather information from business and community leaders to shape their policies. "You are constantly calibrating through this data dependence to risks" of not doing enough to slow the economy, or doing too much.
Right now, she said, the economy is working well, and so are markets.
"We always have the lender-of-last-resort responsibilities, and if market dislocation should come about then we would be prepared to use that, but that's not what I'm seeing right now." What the Fed does see, she said, is that "inflation is problematic, and we are committed to restoring price stability" by raising rates to limit the demand for goods, services and labour that is fuelling inflation.
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