Search ForexCrunch

San Francisco Federal Reserve President Mary Daly on Wednesday said the US  central bank won’t be taking the “punchbowl” preemptively from the economy as the recovery picks up and unemployment falls, Reuters reported.

”The Fed will use a dose of patience  and will not get ‘overly joyous’  as the jobless rate falls, Daly said at a virtual event held by Northeastern University.”

“We are not going to take this punchbowl away….We are committed to leaving the monetary policy accommodation in place until the job is fully and truly done.”

Key comments

Says we won’t be preemptively taking the punch bowl away from US  economy.

Says as we start to see economy recover and unemployment rate fall, want to ‘be strong’ and not get overly joyous.

Says will see a good healthy ‘dose of patience’.

Says will look for sustained achievement of 2% inflation, and projection of a sustained overshoot.

Says Fed is committed to leaving policy accommodation in place until job is truly done.

Says letting economy run beyond what models say is ‘full’ employment particularly benefits disadvantaged populations.

Says for too long economic justice has been relegated into a ‘social’ issue, but it’s economics.

Says over last 20 years and projecting forward 10 years, the risk is too-low inflation, not too-high.

Says Fed’s new framework means, don’t react to fears of inflation; just react if it does occur.

Says Fed can’t fight climate change, but is responsible for fighting climate risk, and mitigating it.

Says we need to understand bank balance sheet risk amid climate risks like wildfires.

Market implications

The market is expecting inflation and US yields are on the rise, helping to lift the US dollar which is benefitting from the decoupling of economic recoveries between the US and particularly the EU and Japan.  

The dollar can run higher vs the euro against this backdrop.  

EUR/USD bears seeking a second daily close below 200D-SMA