San Francisco Fed President Mary Daly says it is too early to judge how Treasury's expanded buybacks in long-dated debt could affect Fed policy. She rejected the idea that Treasury's market moves blur the line with monetary policy, insisting the Federal Reserve stays anchored to inflation and labor-market data rather than bond-market swings.
Daly separates Treasury's role from the Fed's
Mary Daly, president of the Federal Reserve Bank of San Francisco, said Treasury's intervention in long-dated debt markets does not blur the line between fiscal debt management and monetary policy. Speaking on Bloomberg television Thursday, she said it was too early to judge how Treasury's expanded buybacks might affect the Fed's work, describing the shift as early-stage and adding she did not want to be preemptive before policymakers assess the implications.
According to ActionForex: "the Treasury Secretary is different than the Fed", Daly said, stressing the central bank remains focused on its congressional mandate and returning inflation to 2%.
Long yields don't dictate policy, Daly says
Daly also played down the idea that the recent surge in long-term yields should force immediate policy action. She said the rise in long yields is a global phenomenon driven by multiple forces and doesn't offer much signal for the Fed's rate calibration. Shorter-dated yields, by contrast, suggest markets understand the Fed's reaction function, she said.
She described current monetary policy as being in a good place and backed the July decision to hold the federal funds target range at 3.50%-3.75%. Her message carried an institutional edge more than a directional one.
No urgency for a cut or a hike
Daly said the Fed cares about its independence and credibility and sticks to its remit, adding she does not see the central bank's credibility at risk. She also rejected pressure for immediate preemptive moves, saying she sees little evidence that either a cut or a hike is an urgent problem to solve given recent data.
Treasury can alter debt-management mechanics, but Daly's comments signal the Fed intends to keep its decisions anchored to inflation and labor-market conditions rather than react mechanically to volatility at the long end of the bond market.
Source: ActionForex
Trading involves risk.
Risk Disclaimer
