In an interview with Bloomberg TV on Thursday, Federal Reserve (Fed) Bank of San Francisco President Mary Daly argued that the rise in long term Treasury bond yields is a global issue and added that she doesn’t see the Fed’s credibility at risk.
Key quotes “Short term yields show markets understand Fed reaction function.” “Policy is in a good place, is watching markets.” “Modal outlook expects for inflation pressures to fade.” “Was very supportive of Fed’s july interest rate hold.” “Recent jobs and inflation data have not changed outlook so far.” “Not seeing job market contributing to inflation right now.” “Early days to discuss treasury issuance patterns.” “Fed will find a way to achieve its policy goals.” “Fed really has to focus on achieving its inflation target.” “Job market is showing uncomfortable stability, don’t see signs job market is faltering.” “Not seeing AI investment driving broader surge in inflation.” “We are still in a good place to watch the data.” “Fed missing its inflation goal by quite a bit.” Daly downplays long-end move, keeps Fed on data-dependent hold Fed’s Daly delivers a mildly less hawkish tone, with the 5.2/10 FXS Speechtracker score slipping slightly below the 5.5/10 historical average, signaling continuity rather than escalation in tightening bias
By framing the rise in long-term yields as a global issue that blunts the signal for the Fed, while stressing that short-term yields show markets understand the reaction function and that policy is “in a good place,” Daly reinforces a data-dependent hold stance even as the Fed is still missing its inflation goal “by quite a bit.” The emphasis on fading inflation pressures, an “uncomfortably” stable job market that is not seen as driving inflation, and no broad inflation surge from A.I. investment collectively point to patience on rates rather than imminent hikes. The FXS Fed Sentiment Index fell by 1.85 points to 132.75, indicating a modest pullback in perceived hawkishness following the…