September 29, 2023

The following is a transcript of an interview with Mary Daly, president and CEO of the Federal Reserve Bank of San Francisco, that aired Sunday, August 7, 2022, on “Face the Nation.”

MARGARET BRENNAN: We turn now to the state of the economy and to the president of the Federal Reserve Bank of San Francisco, Mary Daly. Good morning.


MARGARET BRENNAN: The San Francisco Fed said fiscal spending throughout the pandemic, all congressional funding contributed 3%-3% to inflation. Do you expect the congressional bill that is about to be passed to increase inflation as well?

DALY: Well, let’s remember that during the time that there was this fiscal easing during the pandemic, there was also an easing of monetary policy. And these were things necessary to overcome the pandemic. That is why it was such an important ingredient in the story, you will be the judge, whether it was too much or too little. But right now, there it was. And my staff has rated this. When I look ahead, there are so many things going on in the economy right now, both domestically and globally. And we are struggling with high inflation. But the Fed is committed to reducing it. And we’re looking at not just things that Congress passes, but what’s happening around the world.

MARGARET BRENNAN: So you think this bill will increase inflation? Has inflation peaked? Can you say that?

DALY: You know, I really can’t comment on pending legislation, and it’s really hard to say because not all the details and or the time frame in which these things will happen have been worked out yet. So right now I think the most important thing, Margaret, is that inflation is very high and the labor market is strong. The global economy is struggling with continued high inflation, and that’s what I’ve been focusing on.

MARGARET BRENNAN: You’re a labor economist. We had this surprisingly strong jobs number on Friday. Why was it such a surprise? What did the economists miss here? What was your package?

DALY: You know, it’s very interesting. You know, it blew everyone away trying to figure out exactly what the number would be. And when you know, a number of views were good. But, you know, honestly, if you’re out in the communities, if you’re traveling anywhere, just go to your own community. I don’t think consumers are workers or businesses were that surprised. There are signs for help everywhere. People can find many jobs if they want them. Search times for jobs are not that long. So I think the labor market continues to perform. It just tells me that people want to work and that people want to hire. But the global truth is that inflation is very high.

MARGARET BRENNAN: But is it still or does it indicate that recession is not where we are or where we’re going?

DALY: If you’re out in the economy, you don’t feel like you’re in a recession. That’s the bottom line. The most important risk out there is inflation. And I think the job market just confirms that.

MARGARET BRENNAN: Okay. We will take a break and be right back with you. Mary Daly, stay with us. We have more questions.


MARGARET BRENNAN: Welcome back to Face the Nation. We now continue our conversation with the head of the Federal Reserve Bank of San Francisco, Mary Daly. In this jobs count on Friday, we also saw that wages rose, but not as fast as inflation. How concerned are you that it shows that inflation is actually building into the economy in a way that will actually force your colleagues at the Fed to keep raising interest rates.

DALY: You know, I don’t see that inflation is built into the economy, the kinds of things that we would worry about that we just couldn’t fix easily. What I see is that supply and demand are simply unbalanced. About 50% by my staff’s estimates of the hyperinflation we’re seeing is demand related. The other 50% to be procured. The Fed is well positioned to reduce demand and we are already seeing the cooling taking place in the housing market and investment. So I see signs that the economy is cooling. It’s just going to take some time for the rate adjustments we’ve made to take place. And we’re still a long way off. This is the promise to the American people. We are far from done. We are committed to reducing inflation and will continue to work until this job is fully completed.

MARGARET BRENNAN: So would it be appropriate to raise interest rates in September by half a percent?

DALY: Absolutely. And we have to be data dependent. Could. We have to keep our minds open. We have two more reports on inflation, another jobs report. We’re continuing to gather all the information from the context we’re talking to you about to see how this plays out in the economy. But you mentioned, you know, wage growth just above 5% inflation. Last print at 9.1%. Americans are losing ground every day. So the focus should be on reducing inflation.

MARGARET BRENNAN: One of the things the Fed can’t control is geopolitical risk. How concerned are you about what is happening right now in the Taiwan Straits?

DALY: Well, there’s so much going on globally, and I think that’s really something to think about. It simply outlasts COVID, ensuring that new variations do not derail economic activity. We have central banks around the world raising interest rates to try to rein in their own inflation. And we have ongoing developments that are taking place geopolitically or just more generally between countries and all these things. The war in Ukraine, all of these are creating headwinds, if you will, for the US economy, and we’re going to have to build on those headwinds for growth while reining in inflation.

MARGARET BRENNAN: The Fed has finished its work and I know we’ll talk again. Thank you very much, Mary Daly.

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