SAN FRANCISCO (Reuters) – The U.S. Federal Reserve’s vow to keep interest rates near zero for what could be years is “appropriate” for now, though more action could be needed as the recovery proceeds, San Francisco Fed President Mary Daly said on Tuesday.
“We’ve got the economy and the policy in a good position right now,” Daly told reporters on a call. “I see us as well positioned to weather this storm we are in, and it remains to be seen if more will be needed … I’ll continue to watch the data and see if adjustments will be necessary.”
The Fed slashed interest rates to zero in the face of the coronavirus pandemic and began pumping trillions of dollars into financial markets, extraordinary actions that have helped fuel stock price gains even as the real economy struggles to regain its footing. Millions of Americans are still out of work.
The situation, Daly said in a talk Tuesday hosted virtually by the University of California, Irvine, “seems unfair (and) another example of Wall Street winning and Main Street losing.”
But keeping interest rates at their current near-zero levels until the economy returns to full employment, as the Fed has promised it will do, will in time create more jobs and help reduce inequality, Daly said.
And while raising rates earlier might keep the already rich from adding further to their wealth, she suggested, it would also exacerbate inequality by making jobs for everyone else even harder to come by.
“I am not willing to trade millions of jobs … to keep the stock market from going up for the few who have those holdings,” she said.
(Reporting by Ann Saphir; Editing by Sandra Maler and Stephen Coates)