Mary Daly said the Fed could raise interest rates by 50 or 25 basis points at the FOMC meeting on January 31-February 1.
“I can make arguments for either option. The Fed has to be as gentle as it can be in trying to bring inflation down, but at the same time make sure that hyperinflation doesn’t escalate,” Daly said in an interview published Monday.
Daly said she expects the central bank to raise interest rates above 5 percent before pausing, although the final level is uncertain and depends on incoming data on inflation. Daly also emphasized that he thinks the policy rate, currently 4.25-4.50 percent, should go to 5.0-5.25 percent and stay there to bring inflation down.
In addition, Daly stated that the data would determine how high the interest rate should go. She also said that she expects her to regress to the band.
While the Fed slowed the rate of increase in interest rates at its December meeting, she emphasized that additional tightening will bring inflation to the 2 percent target of the central bank and that borrowing costs may remain at higher levels for a while.
