Fed's Daly says the Fed has tools to pull back inflation if needed

Ross J Burland FXStreet

San Francisco Federal Reserve President Mary Daly said fiscal support is ''what we need right now and doesn't see fiscal stimulus boosting inflation in unwelcome ways''.

Daly says the Fed has tools to pull back inflation if needed.

She expects by 2H there will be a bounceback in the economy similar to last summer.

Will need 'big dose of patience' in summer as inflation starts to rise.

Market implications

The market has already started to make up its mind that inflation is going to be a problem for the US recovery.

The concerns are for low productivity, reduced savings and increased spending due to fiscal stimulus and helicopter money, ultimately reducing demand, especially foreign demand, for effectively zero yielding US Treasury bonds.

However, Fed officials are staying dovish and argue that inflation will be transitory.

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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