The January nonfarm payrolls figure was a “wow number,” said San Francisco Fed President Mary Daly on Friday. “But the trend was not surprising. We knew the labor market was strong.”
That stronger-than-expected jobs data is only one report, and by itself, isn’t likely to sway the Federal Open Market Committee’s path in raising rates. She currently sees the FOMC’s economic projections released at the December 2022 meeting “as a good indicator of where policy is at least heading.”
The median projection estimated the federal funds rate will end 2023 at 5.1%, compared with its current level of 4.50%-4.75%, implying two more 25-basis point rate hikes. “But I’m prepared to do more than that, if needed,” Daly said during an interview on Fox Business Network.
“And so we really will have to be in a restrictive stance of policy until we truly understand and believe that inflation will come squarely back down to our 2% target,” she said. “That’s what the Fed is united and resolute in providing.”
As for the employment report on Friday that showed more than half a million jobs were added and unemployment fell to 3.4%, “this was one report, but we have many data points coming in before the next time we get together,” she said.
The FOMC next meets on March 21-22. By then there will be the February nonfarm payrolls report, two more consumer price index reports, and one more personal consumption expenditure report.
She declined to say if inflation has peaked. “I think it’s far too early to declare victory and even think about peaking. We’re in the early stages.”
With the stronger-than-expected jobs report, SA contributor Mike Zaccardi says value stocks could return to favor.
