San Francisco Fed President Mary Daly said in a speech that “a swell of market and academic commentary has started to emerge about a quick snapback, an undesirable pickup in inflation, and the need for the Federal Reserve to withdraw accommodation more quickly than expected”.
But that was only “reaction to a memory of high and rising inflation, an inexorable link between unemployment, wages and prices, and a Federal Reserve that once fell behind the policy curve”. She added, “the world today is different”.
She viewed “recent rise in inflation compensation to roughly 2 percent as encouraging and in line with our stated goals. It suggests that our commitment to flexible average inflation targeting has already gained substantial credibility.”
“Today, the costs are tilted the other way. Running inflation too low for too long can pull down inflation expectations, reduce policy space, and leave millions of Americans on the sidelines along the way.”
