Fed’s Daly Sees Growing Chance of Half-Point Rise in May: FT

(Bloomberg) -- The case for a half-point interest rate hike at the Federal Reserve's May meeting has increased, said San Francisco Fed President Mary Daly, citing rising inflation and the tight labor market. 

“The case for 50, barring any negative surprise between now and the next meeting, has grown,” Daly told the Financial Times in an interview conducted on Friday. “I'm more confident that taking these early adjustments would be appropriate.”

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In March, the Federal Open Market Committee raised its benchmark interest rate by just a quarter point against a backdrop of Russia's war in Ukraine and the fastest inflation in four decades. Since then, price pressures have only mounted, and labor market data has shown solid employment growth and an acceleration in wages.

Daly spoke to the FT after a new report showing that the U.S. economy had created 431,000 jobs in March and that the unemployment rate had dropped to 3.6%.

Read More: U.S. Hiring Stays Robust as Jobless Rate Falls, Wages Pick Up

The data show that the labor market is “very strong” and “tight to an unsustainable level,” she told the paper. 

“If you want a job in the United States, you can get one and you can probably get multiple jobs at this point,” she said. “If you're an employer looking for workers, it's hard to both hire them and retain them.”

Daly is not a voting member of the rate-setting Federal Open Market Committee in 2022. She estimated the neutral policy rate to be between 2.3 percent and 2.5 percent. 

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