Real Impact of Fed Hikes Likely Bigger Than What Target Rate Implies, Daly Says

Real Impact of Fed Hikes Likely Bigger Than What Target Rate Implies, Daly Says
San Francisco Federal Reserve Bank President Mary Daly poses at the Commonwealth Club of California in San Francisco on Nov. 16, 2021. Ann Saphir/Reuters
Reuters
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San Francisco Federal Reserve President Mary Daly said on Monday the real-world impact of the U.S. central bank’s interest rate hikes is likely greater than what its short-term rate target implies.

Against the Fed’s current short-term target rate of between 3.75 percent and 4.00 percent, Daly said some researchers have found “the level of financial tightening in the economy is much higher than what the (federal) funds rate tells us.” Compared to the current target rate, she added, “financial markets are acting like it is around 6 percent.”