Federal Reserve Bank of San Francisco President Mary Daly on Sunday said the US central bank will “absolutely” raise interest rates half a percent in September to try to bring down red-hot inflation.
Daly appeared on CBS’ “Face the Nation,” saying Americans are struggling as inflation hits 9.1% – the highest since 1981 – while wage growth is not rising at as fast a rate.
“Americans are losing ground every day, so the focus has to be on bringing inflation down,” Daly said.
The potential rate hike comes as the US economy is teetering on the brink of a recession.
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The Commerce Department reported last week that the GDP shrank by 0.9% in the second quarter after tumbling 1.9% over the year’s first three months.
However, Daly said that she doesn’t see that inflation is embedded in the economy, which she says has shown signs of cooling.
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“What I see is supply and demand are just unbalanced. About 50%, by my own staff’s estimates, of the excess inflation we see is related to demand, the other 50% to supply,” she said.
Daly said that she believes the Fed is in a great position to bring demand down, and that they already see signs of cooling forming in the housing market and in investments.
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“So I do see signs the economy is cooling, it’s just going to take some time for the interest rate adjustments we’ve made to work their way through,” Daly said. “And we’re far from done yet, that’s our promise to the American people.”