Fed’s Daly: Pause in rate hikes comes after benchmark gets up to about 2.5%

The time to pause the rise in interest rates is when the Federal Reserve gets its benchmark policy interest rates up to about 2.5%, said San Francisco Fed President Mary Daly on Wednesday.

“We need to get the rate up to neutral, which I put about 2.5% in nominal terms. We need to do that expeditiously,” Daly said, in an interview on CNBC.

“I need to see some real progress on inflation. Otherwise, I would think we just move the rate until we find ourselves at least at neutral and then we look around and see what else needs to be done.”

Minutes of the Fed’s May meeting showed that most Fed officials support half-percentage point moves at both the Fed’s June and July meeting, and Daly’s comments signaled she is on board with that plan.

Those two rate hikes would push up the Fed’s benchmark rate up to a range of 1.75%-2%, still short of Daly’s estimate of neutral.

Atlanta Fed President Raphael Bostic, in an exclusive interview with MarketWatch, said a pause in September might make sense.

With the stock and bond markets reacting strongly to the Fed’s rate hike plans, economic conditions might also be evolving in a similar manner, he said.

On the other hand, Fed Gov. Christopher Waller indicated he would support another 50 basis point hike in September.

U.S. stocks
DJIA,
-1.11%

SPX,
-1.32%
were sharply lower on Wednesday on signs high inflation might persist.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.933%
jumped to 2.941%.

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