Fed’s Daly: Biased toward running economy hot, given low inflation and uncertainty over full employment

While speaking at the Reserve Bank of New Zealand (RBNZ)/International Monetary Fund (IMF) conference in New Zealand, the Federal Reserve Bank of San Francisco’s President Marcy C. Daly conveyed worries about the economy, monetary policy.

Key quotes

• 'Biased' toward running economy hot, given low inflation, uncertainty over 'full employment'.
• Persistently undershooting Fed's 2% goal is worrisome.
• 'Make-up' strategy on meeting inflation goal could help counter inflation under-runs.
• 'Hot' US labor market disproportionately benefits disadvantaged groups.
• Overly tight labor market could encourage decisions that could harm long-term economic growth.
• Corporate debt doesn't pose 'acute' financial stability risk, but watching closely.
• Fed may want to consider countercylical capital buffer if financial vulnerabilites increase.

FX implications

Comments like these generally have a little market impact unless carrying any direct strong challenges to the Fed’s present monetary policy.