FILE PHOTO: San Francisco Federal Reserve Bank chief of research Mary Daly stands near the podium before a speech at the CFA Society in San Francisco, California, U.S. July 10 2018. REUTERS/Ann Saphir/File Photo
September 14, 2018
By Ann Saphir
FORT WAYNE, Ind. (Reuters) – Mary Daly, a labor economist who dropped out of high school, later earned a PhD from Syracuse University, joined the San Francisco Fed’s research department in 1996 and led it since 2017, was picked on Friday to be the bank’s next president after a five-month search.
Daly, 55, will succeed John Williams, who left in July to become president of the New York Fed. She will take over the U.S. central bank’s westernmost outpost starting Oct 1, the San Francisco Fed said in a statement.
The timing means she will cast her first votes on monetary policy at the Fed’s November and December meetings.
A prolific researcher who has focused for years on economic inequality, wage trends and labor force dynamics, Daly’s public record shows she is likely to be a supporter of the gradual rate hikes favored by Fed Chair Jerome Powell and most of the rest of the policy-setting panel.
Steady hikes from the Fed have come as the U.S. economy has gained steam, the unemployment rate has dropped, and inflation has crept up to the Fed’s 2-percent target. The European Central Bank and the Bank of Japan by contrast have yet to raise rates from crisis-era levels.
As a Missouri native and high-school dropout who was living on her own at age 16, she will add a distinctive perspective to a group dominated by men whose two-day meetings eight times a year set interest rates for the world’s largest economy.
She will be one of three female Fed regional bank presidents. She is also the first lesbian to hold a Fed policymaking post.
Daly will oversee the largest Fed district by population, which is home to a fifth of American jobs and accounts for 22 percent of national personal income.
It is also a region known for the outsized role of the global technology industry as the headquarters of Apple, Alphabet and Facebook, among others. The high wages of such workers has exacerbated income inequality and caused spiraling house prices in and around San Francisco.
“She is a terrific economist that made a major contribution to our understanding of labor markets,” said former Fed Chair and San Francisco Fed President Janet Yellen.
“She is an excellent communicator, a strong supporter of diversity.”
She was an early advocate for the Fed’s controversial bond-buying program during the financial crisis.
As the unemployment rate has dropped in the years since has written extensively about why wages have not bounced back as many had expected, of the necessity of making sure that all Americans who want to work can work, and of the need to increase labor force participation rates to boost economic growth in the long-run.
But, like former Fed Chair Janet Yellen who also once ran the San Francisco Fed, Daly’s empathy for workers left out of the economic expansion does not necessarily mean she’ll fight the central bank’s current rate hike cycle.
The economic outlook “is surprisingly bright,” she said in previously unreported comments in San Francisco this past July.
Though she expects unemployment to continue to fall, she said, “there are very few signs that wage inflation is running away anywhere, and few signs that means overall inflation is around the corner.”
And yet, she said, the Fed cannot simply let the economy “run wild,” leaving interest rates where they are in hopes of bringing even more people into the labor force.
That, she said, would not only risk financial instability and inflation, but it could entice some younger workers into the labor force who might otherwise pursue education, leaving them less resilient in the face of the inevitable next downturn.
“You want to sustain the expansion, and you are already at full employment and you are already at your target inflation rate,” she said.
“But you want to keep the economy going, and what you want to do in particular is you want to avoid high inflation so you don’t want to run the economy too hot…but you don’t want to run the economy too cool, take away the punch bowl too fast.”
(Additional reporting by Howard Schneider, Daniel Burns and Lindsay Dunsmuir; Editing by Chizu Nomiyama)