(Bloomberg) -- Federal Reserve Bank of San Francisco President Mary Daly said policymakers will likely need to raise interest rates higher and maintain them at elevated levels for a longer period of time.
“It’s clear there is more work to do,” Daly said in a speech Saturday at Princeton University in New Jersey. “In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”
Daly said inflation remains high in each sector — goods, housing and other services — and that the bumpy nature of incoming data paints an unclear picture for disinflation momentum. While Daly doesn’t vote on policy this year, she is a participant in Federal Open Market Committee meetings and discussions.
The Fed has tightened aggressively in the last 12 months, lifting its benchmark policy rate from nearly zero to a target range of 4.5% to 4.75%, though policymakers have recently slowed the pace of rate increases. They downshifted to a quarter percentage point move on Feb. 1 after hiking by a half point in December, which followed four consecutive 75-basis-point increases.
“This tightening, while pronounced, was and remains appropriate given the magnitude and persistence of elevated inflation readings,” Daly said.
During a post-speech question and answer session she discussed the potential impact of lags but made clear that the Fed could not afford to pause with inflation still too high.