Central banks should be acting early and decisively to counter economic headwinds, according to a visiting US Federal Bank head.
Mary Daly is an American economist. Photo: RNZ
Federal Reserve Bank of San Francisco president Mary Daly said the recent rate cut by the Fed, the first in a decade, was appropriate and an example of banks acting pre-emptively rather than waiting to respond to events.
She told reporters at a Reserve Bank-sponsored conference in Wellington that she backed assessing events to see if another rate cut by the Fed was needed to help the US economy maintain its strong momentum and meet its inflation target.
"I'm in a watch-and-see position right now," Ms Daly said.
But she said she backed central banks acting early to meet inflation targets and counter global headwinds and uncertainty.
"I'm convinced using our tools early and pre-emptively is better than waiting ... better to avoid the ditch rather than digging yourself out of the ditch."
Ms Daly is a non-voting member of the Federal Reserve, but does participate in discussion on interest rates, and will move onto the powerful rate-setting committee in 2021.
She also said the world was evolving and monetary policy needed to evolve with it, but there was a limit to what moving interest rates and other measures such as quantitative easing could achieve.
"We're facing a world where the blunt instrument of monetary policy is not going to be sufficient, in all likelihood, to offset all the challenges we face."
She said that meant more people and groups needed to support act and support policies to underpin economies.
"We're going to need more hands on deck ... if we're all rowing in the same direction we'll get better outcomes for the economy," she said.
Ms Daly said she did not feel under pressure from President Donald Trump's highly critical and at times abusive tweets against the Fed and its chair Jerome Powell.
"I don't feel any political pressure ... when we start our deliberations politics never comes up ... it's all about how do we best serve the American people."