Daly doesn’t see the Fed easing interest rate hikes anytime soon. She predicts they’ll continue into at least 2023, but says that’s ultimately a good thing — even if Wall Street investors don’t agree. “There is a lack of understanding in the markets, but consumers seem to understand,” she said. “They depend on the Fed to not introduce unnecessary volatility. The worst thing you can have as a business or a consumer is to have rates go rapidly up and then come down. … It just causes a lot of caution and uncertainty.”
A raise and hold strategy has historically paid off for the Fed, she said. The central bank is actively trying to warn against the idea of a “large hump shaped rate path, where we’ll ratchet up really rapidly this year and then cut aggressively next year.”
“The job market is strong, inflation is too high,” Daly said, “and the Federal Reserve is committed to using its tools to bring the economy back to a sustainable path where people don’t have to wake up every morning worrying about whether their real wages are eroding.”
