The Fed’s Mary Daly says rate hikes should continue until inflation is tamed

San Francisco Federal Reserve President Mary Daly said Wednesday she backs raising interest rates aggressively until inflation comes down to a reasonable level.

Those moves likely would entail multiple 50 basis point hikes at coming meetings, then a possible rest to see how the central bank policy tightening is combining with other factors in addressing the massive surge in consumer prices.

“We need to do that expeditiously, and I see a couple of 50 basis point hikes immediately in the next couple of meetings to get there,” she told CNBC’s Steve Liesman during an interview on “TechCheck.” “Then we need to look around and see what else is going on.”

Daly said she sees some initial signs of a slowing economy and reduced inflation, but will need to see much more progress before the Fed can taper its efforts.

“We aren’t really there yet, so we need to see those data on a slowing economy bringing demand and supply back in balance, and I need to see some real progress on inflation,” she said. “Otherwise, I would think we just move the rate until we find ourselves at least at neutral and then we look around to see what else needs to be done.”

So far this year, the Fed has enacted two rate increases totaling 75 basis points, including a 50 basis point increase in May. A basis point equals 0.01%

Multiple officials have said the 50 basis point moves are likely to continue despite the fact the central bank usually prefers a per-hike increase of 25 basis points. Though inflation measures such as the consumer price index and the Fed’s preferred core personal consumption expenditures have come off their recent highs, they are still near levels last seen in the early 1980s.

“I don’t meet anyone, contacts, consumers, anyone, who thinks the economy needs help from the Fed right now,” Daly said. “I certainly am comfortable to do what it takes to get inflation trending down to the level we need it to be. I really think these inflation numbers have been going on too long, and consumers, businesses and everyday Americans are depending on us to get inflation back down and bridling it.”

How far Daly and the rest of the Fed are willing to go remains to be seen, and she said that data will dictate how high rates trend.

Most Fed officials estimate the “neutral” level of their benchmark borrowing rate to be around 2.5%. It currently is targeted in a range between 0.75% and 1%.

Daly said issues such as supply chain backlogs, the war in Ukraine and China’s economic reopening after a Covid-related shutdown will be factors on whether inflation has peaked. If she doesn’t see progress, “we need to go into restrictive territory,” she added.