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According to the Fed’s Daly, you are not afraid of inflation being too high

© Reuters. FILE PHOTO: Mary Daly, President of the Federal Reserve Bank of San Francisco, poses in Idaho Falls after speaking on the US economic outlook

(Reuters) – San Francisco Federal Reserve President Mary Daly on Tuesday stood up to critics who warned of low interest rates and that government spending could overheat the US economy and trigger high inflation.

“I don’t think we have unwanted inflation around the corner,” Daly said at a virtual event hosted by the University of San Francisco. “I don’t think that’s a risk we should be thinking about now.”

The Fed has pledged to keep interest rates close to zero until inflation climbs to 2% and is expected to exceed that target and until the economy reaches full employment as well. The central bank has also promised to continue buying $ 120 billion in bonds each month until it sees “significant further progress” in both inflation and employment.

That super-light stance, coupled with the Biden government’s proposed $ 1.9 trillion spending bill for pandemic aid, has some analysts warning of an impending spike in inflation.

Fed policymakers, including Fed Chairman Jerome Powell, have generally opposed this narrative, and Daly’s Tuesday comments were the latest on this line.

“We should be less afraid of the inflation around the corner and realize that fear is costing millions of jobs, millions of livelihoods, millions of hopes and dreams,” she said, referring to the economic damage that could result if that were to happen Fed policy also tightened soon.

“Let’s continue to focus on the dual mandate – full employment and price stability – and don’t let the fears of price stability that we forget about all those people who stand apart and do not have the jobs they deserve become too captivated.”

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