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San Francisco Fed President feels 'zero' political pressure from Trump

Thursday 29th August 2019

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The US Federal Reserve has come under heavy fire from President Donald Trump but Mary Daly, president and chief executive officer of the Federal Reserve Bank of San Francisco, said politics are never on its agenda.

“You literally walk across the threshold of the FOMC meeting room and when we walk in and we start our deliberations, politics never comes up. They never come up. We never discuss them,” she told journalists in Wellington.

“I don’t feel under any political pressure. Zero,” she added. Daly is currently a non-voting member. 

In response to a question about possible public perceptions that Trump is exerting pressure, she said “good work builds credibility and it doesn’t so much matter what people are saying or how other people reflect on you.

“If we work for the American people to achieve the dual mandate and the people in the US see we are striving for full employment and price stability, I am confident that is what they will take in,” she said.

According to Trump’s latest tweet “at the G-7 in France, all of the other Leaders were giddy about how low their Interest Costs have gone. Germany is actually “getting paid” to borrow money - ZERO INTEREST PLUS! No Clue Fed!” Trump has also attacked Fed chair Jerome Powell and asked who was the bigger "enemy," Powell or Chinese President Xi Jinping.

Daly also said that the markets’ perception on what action the Fed might take “doesn’t limit or promote our decision.” Markets currently see a 99.6 percent chance of a 25-basis point cut at the September meeting, according to CME Group’s FedWatch tool.

She did note, however, market participants ultimately determine financial conditions and it does look at those conditions. It's "a nuance, but an important one," she said.  

“It’s not a constraint, its an input,” she said.

Daly said that while the FOMC wants to understand the impact of its interest rate decisions on economies like New Zealand’s that's largely because of how that impact might affect the US. "We make monetary policy for the US, that’s our charge.”  

However, “ultimately, are all interconnected and impacts that are going on in other countries filter themselves back to the US and our balancing act of policy is thinking about the domestic economy and also the global economy,” she said.

Regarding the upcoming FOMC meeting in September, she said she is in a “watch and see position right now.”

Daly supported the recent rate cut by the FOMC and said it was a “recalibration of policy to be slightly accommodative” because the outlook wasn’t as positive as it was in March. 

She said it was better to use the tools early and preemptively. 

"It's better to avoid the ditch than try to dig yourself out of the ditch."

Looking ahead, she said there are three, almost four weeks, between now and the next meeting and that’s quite a considerable amount of time to collect additional information.

Specifically, she is looking at consumer confidence and spending and said recent data is positive. She is also looking at business investment, business spending and inflation numbers.

She said, however, the economy is well positioned to continue to grow slightly above trend, with sustained labour market expansion. Inflation will also continue moving toward the 2 percent target.

She noted, however, there are still headwinds, including the US-China trade tensions. 

Slower global growth and high uncertainty – linked to the trade issues – have been "like a strong wind blowing against us. Sometimes it gusts, but mostly it’s just strong.”


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