Odd Lots San Francisco Fed President Mary Daly Explains the 'Hawkish Cut'
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Dec 23, 2024 Mary Daly, President of the Federal Reserve Bank of San Francisco, shares her insights on the recent 25 basis point rate cut and the Fed's shift in strategy. She delves into the complexities of inflation, particularly in housing, and emphasizes the need for collaboration between sectors. Daly discusses the evolving labor market, highlighting the role of CEOs in hiring decisions. Plus, she examines the impact of AI on productivity and its potential to transform industries amidst fiscal policy challenges.
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Reason for Rate Cut
- The Federal Reserve cut rates to moderate restrictiveness after successfully lowering inflation and balancing the labor market.
- Leaving rates high while nearing goals risks harming the economy and job growth.
Drivers of Current Inflation
- Current inflation is driven by non-market prices like financial services and housing services.
- A housing shortage contributes to elevated inflation, requiring broader solutions beyond Fed policy.
Builder Response to Rate Cuts
- Builders in Daly's district resumed projects after a 50-basis point rate reduction, encouraged by the downward trend.
- Public and private sectors collaborate to address housing challenges, recognizing the Fed's limited tools.