February 12, 2020 / 3:50 PM / 5 days ago

Fed's Daly says U.S. economy well placed to weather storms

FILE PHOTO: San Francisco Federal Reserve Bank President Mary Daly poses at the bank’s headquarters in San Francisco, California, U.S., July 16, 2019. REUTERS/Ann Saphir/File Photo

DUBLIN (Reuters) - The United States economy is in a good place to weather economic storms thanks to policy action taken by the Federal Reserve last year, San Francisco Fed President Mary Daly said on Wednesday.

Daly said businesses she had spoken to were more confident that the economy was in a good place than they were at the end of last year.

The Fed cut interest rates three times last year to a target range of 1.5% to 1.75% and policymakers have signaled they expect no change for the rest of the year. Daly has said she thinks policy is in a good place.

“The U.S. economy faces headwind after headwind after headwind, as all economies do, and we have taken our policy accommodation last year to put our economy in a good position, in my opinion, to weather these storms,” Daly told a banking conference in Dublin.

“My business contacts, they have started to take a few of their risky projects off the shelves... I don’t think there’s a sea change but I see a little more optimism.”

Daly added that the natural rate of unemployment was clearly lower than policymakers had thought, and probably around the current rate of 3.6%, though she said she had been repeatedly wrong before.

The Fed expects to conclude a review of its strategy framework by mid-year, and Daly is among those who have supported considering more aggressive ways to reach its inflation target.

“Speaking only for myself,... a longer period over a business cycle ...makes some sense because then you’re offsetting the downturn, the negative effects of inflation with running a little bit above target in the upturn,” she said.

“We’re not talking about massively above target, 2.3%, 2.4%.”

Reporting by Padraic Halpin; Editing by Catherine Evans and John Stonestreet

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