Top Fed official warns the COVID delta variant is a threat to the US economy and says the central bank will keep supporting growth
- The COVID delta variant is a threat to the global economy and US growth, a top Federal Reserve official said.
- SF Fed boss Mary Daly told the Financial Times the central bank should be patient in supporting the US recovery.
- Policymakers are debating how fast to withdraw support in the wake of a rapid rebound.
A top policymaker at the Federal Reserve has said the fast-spreading delta COVID-19 variant poses a risk to the rebound in global growth, and said the central bank should be patient in supporting the US recovery.
"I think one of the biggest risks to our global growth going forward is that we prematurely declare victory on COVID," Mary Daly, the President of the Federal Reserve Bank of San Francisco, told the Financial Times in an interview published Friday.
She said countries around the world need to increase their vaccination rates, or COVID could continue to spread and act as a "headwind on US growth."
Policymakers around the world are bracing for the delta variant to spread further, after sending cases soaring in the UK. Transmission of the coronavirus has started to rise again in 14 US states, the Institute for Health Metrics and Evaluation told Insider. About 60% of COVID-19 cases across the US are due to the delta variant, researchers at Scripps have estimated.
Daly, who is a voting member of the Federal Open Market Committee, struck a cautious tone on the topic of when the US central bank should cut back its support for the economy. This currently consists of $120 billion a month in asset purchases and interest rates near zero.
She said the Fed is committed to both price stability and full employment. She added that it should "really be patient enough and persevere enough to deliver on those commitments which we've made to the American people."
Daly said: "I think there's always this excitement that 'Oh my gosh: look, the vaccinations are working, this could be the end'. But it would be premature to say that we've achieved a victory here."
Global stocks fell on Thursday and bonds rose as investors worried that economic growth could be slower than initially expected. Concerns were driven in part by the rapid spread of the delta variant around the world.
Bond prices have risen sharply in recent weeks, pushing down yields, after the Fed's June meeting. Fed officials brought forward their forecasts for when interest rates would start to rise to 2023, making investors think medium-term growth and inflation will be a bit lower than previously thought.
Minutes from the June meeting showed that there is a lively debate going on inside the Fed about when to cut back on support. Daly told the FT that the debate was a healthy sign that decisions aren't being made in an echo chamber.