San Francisco Fed President Mary Daly has downplayed internal disagreements over the wording of the Federal Reserve's policy statement, emphasizing that the committee's actions are the true indicator of policy direction.
In an interview on Thursday, Daly stated that "the wording of the statement is less important than the actions of the FOMC," noting that the key signal from the meeting was that "everyone agreed on the decision." She added that she would not have objected to the vote.
During last month's policy meeting, three voting members expressed dissent regarding the statement's wording, which suggested a future return to interest rate cuts.
These members argued that, given the rise in oil prices due to the conflict in Iran and increased economic uncertainty, the policy statement should give equal weight to the possibilities of both rate hikes and cuts. This rare instance of multiple dissents has drawn market attention to the Fed's future policy path.
Daly indicated there are currently no signs that the surge in energy prices is driving up medium to long-term inflation expectations.
She described it as "too early to draw conclusions" at this stage. If the conflict with Iran subsides, oil prices decline, and the effects do not spread to the broader economy, previous macroeconomic fundamentals could reemerge.
Daly believes current monetary policy is in a "mildly restrictive" zone, and a resolution to the U.S.-Iran conflict would exert downward pressure on inflation.
Meanwhile, the labor market remains stable and is not generating inflationary pressures, providing the Fed with policy flexibility during this period of observation.
