Despite positive inflation readings in June, the Federal Reserve remains committed to raising interest rates, according to San Francisco Fed President Mary Daly. In an interview on CNBC, Daly stated that it is still too early to declare victory on inflation and that she is currently in a “wait-and-see” mode.
Earlier in the week, Daly had mentioned that two more interest rate hikes were likely needed this year. When asked if she had changed her stance, Daly clarified that two hikes remained a “reasonable projection” that allowed the Fed to keep its options open.
Daly emphasized that her main focus right now is determining if further rate hikes are necessary and how much they would be needed to bring inflation down to the desired 2% target. She also highlighted that the inflation outlook remains uncertain.
Traders in the derivatives market expect the Fed to raise their benchmark rate by 25 basis points at their upcoming meeting, followed by a pause. This would set the “terminal rate” at 5.25% to 5.5%.
The median forecast of Fed officials, including Daly, at the last policy meeting indicated two more interest rate hikes for this year. However, only a few officials hold the view that rates should not be raised again in 2022.
Stocks saw gains on Thursday, with the DJIA (+0.20%) and SPX (+0.62%) both rising. Simultaneously, the yield on 10-year Treasury notes TMUBMUSD10Y (3.788%) fell to 3.80%.
