On Monday, San Francisco Fed President Mary Daly revealed that she did not worry even if the employment report for April turned out weak because it fueled market volatility.
According to her, the US economy is in a state of transition, so despite the lower-than-expected data, she remains encouraged on the economic trajectory. But she warned that target levels are yet to be achieved, so the government and the Fed should not rush to taper Covid relief programs.
Daly also mentioned that the April employment report highlighted an unusual dynamic in the labor market. Apparently, some workers were unable to return to work due to childcare or fears of contracting the coronavirus.
She said the additional government incentives might have encouraged some workers not to return to their jobs, but noted that they are needed because there are still many factors that make the labor market unstable.
In this regard, Daly said she does not agree to early ending of support programs, nor a hike in interest rates.
Other Fed officials also made it clear that they will not ease bond purchases before raising the rates. The central bank is currently buying approximately $ 120 billion bonds a month, thereby raising its ever-growing balance sheet to almost $ 8 trillion.
But Daly is worried that the soft monetary policy may lead to unprecedented price increases. Although the Fed intends inflation to go beyond 2%, it may jump to a very high level due to shipping costs and lumber shortages.
The next Fed meeting will be on June 15 and 16.
