San Francisco Federal Reserve Bank President Mary Daly has crossed the wries with the following comments:
- She is not leaning one way or the other on July interest rate decision.
- Too early to tell if economy needs additional stimulus to get to above-trend growth.
- US economy needs above-trend growth to boost inflation.
- ‘Real-side’ data has come in a little bit stronger than expected.
- She sees no clouds looming on consumer spending, healthy labour market.
- Her business contacts feel uncertain, but have not switched to ‘storm cloud’ plan.
- Sees potpourri of headwinds, including trade, mood, uncertainty, global slowdown.
- Jury still out on whether headwinds are strong enough to knock economy to below-trend growth.
- Business behaviour is leading indicator on where economy is heading.
- Asked if rates will be lower by year’s end, says she will learn a lot in next two months.
FX implications
None at all. The market is comfortably pricing in a rate cut – But the question is whether it will be a one and done scenario and how deep it will be this time around. Earlier today, we had yet further evidence that the Fed is only likely to cut by a 25 basis point reduction in July (rather than 50bp) which should be sufficient as a first insurance move to offset the negative effect of trade wars. US consumer spending moved ahead solidly in June, with Retail Sales posting a stronger than expected 0.4% increase.
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