Fed's Daly says the oil shock could change the 2026 rate path
Mary Daly said the oil shock could leave rates on hold, force hikes or still allow cuts if the conflict ends quickly, after she had expected one or two cuts in 2026 before the shock.
From the sources (11 posts)
@financialjuiceFed's Daly: It is hard to tie an increase in productivity growth to the real neutral rate, but it's something to watch on both sides.
@financialjuiceFed's Daly: Right now, it is too early to know if the oil shock is a short-run shock or a persistent shock. It depends on the duration of conflict, if it ends soon, we will be back on the path of interest rates that we were.
@financialjuiceFed's Daly: The oil shock probably has more of an inflation effect than a growth effect.
@firstsquawkDALY SAYS FED FUNDS ARE SLIGHTLY RESTRICTIVE NOW, JUST ABOVE 3% NEUTRAL
@deitaoneDALY: BEFORE OIL PRICE SHOCK, FELT ONE OR TWO CUTS IN 2026 WOULD BE NEEDED
@financialjuiceFed's Daly: Before the oil price shock, I felt one or two cuts in 2026 would be needed.
@financialjuiceFed's Daly: At this point, I am looking to see if higher oil prices spill into other goods and services prices.
@deitaoneDALY: COULD LEAVE RATES WHERE THEY ARE; IF INFLATION TOOK OFF WOULD NEED TO RAISE RATES; IF CONFLICT ENDS QUICKLY COULD CUT
@firstsquawkDALY: BEFORE OIL PRICE SHOCK, FELT ONE OR TWO CUTS IN 2026 WOULD BE NEEDED || AT THIS POINT, LOOKING TO SEE IF HIGHER OIL PRICES SPILL INTO OTHER GOODS AND SERVICES PRICES
@financialjuiceFed's Daly: Could leave rates where they are; if inflation took off, we would need to raise rates; if conflict ends quickly, we could cut.
@firstsquawkDALY: IN WAIT AND SEE MODE, NICE PLACE TO BE || COULD LEAVE RATES WHERE THEY ARE; IF INFLATION TOOK OFF WOULD NEED TO RAISE RATES; IF CONFLICT ENDS QUICKLY COULD CUT