Business

San Francisco Fed boss urges calm amid fears of stagflation


Between the widespread layoffs and the floundering real estate market, the business leaders that turned up to a chat about the San Francisco economy at The Commonwealth Club on Monday probably didn’t want to hear that everything was going OK—but nevertheless, that was what they got. 

“We are in a better place today than where we were [two years ago],” San Francisco Federal Reserve President Mary C. Daly said in an hour-long appearance. However, because inflation is still higher than it should be—currently hovering at roughly 3% as opposed to the Fed’s targeted 2%—now isn’t the time to lower interest rates yet, she said. 

“In order to get inflation down to our target, it is very likely it will take more of a demand restraint to do the job,” Daly said. “And when you slow demand, the labor market slows.”

In layman’s terms, the Fed is still trying to rein in spending across the board so that prices don’t increase too fast relative to workers’ wages. The only mechanism it has to do so is to make borrowing money more expensive for homebuyers, employers and owners of struggling commercial real estate properties alike. 

But in doing so, the Fed also has to be careful not to tip the scales too far in the other direction, Daly said. For if interest rates were to stay where they are for too long, employers might start cutting jobs rather than just slowing down hiring. 

“We have two goals, one tool and a lot of uncertainty,” Daly said. 



Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button