A top Federal Reserve official has warned the spread of the Delta coronavirus variant and low vaccination rates in some parts of the world pose a threat to the global recovery as she urged caution in removing monetary support for the US economy. “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, said in an interview with the Financial Times. “We are not through the pandemic, we are getting through the pandemic.”
Daly, who is a voting member of the Federal Open Market Committee this year, pointed to the struggles to contain the virus in Japan and other countries. Surging infections and lagging inoculation campaigns abroad were constraining the economic rebound and could have negative ramifications for the US, she said.
‘If the global economy . . . can’t get . . . higher rates of vaccination, really get Covid behind [us], then that’s a headwind on US growth,” Daly said. “Good numbers on the vaccinations are terrific, but look at all the pockets where that isn’t yet happening.”
Daly’s warning came as investors sought out safe havens in droves this week, sending US government bond prices soaring. Treasury yields have fallen sharply as a result, with the benchmark 10-year note trading at its lowest level since February. Global stocks fell on Thursday.
Many market participants attributed the sharp drop in Treasury yields to technical factors. But a growing chorus has expressed concern that the economy will struggle to maintain the red-hot growth rates that have accompanied the reopening to date, and predicted that the recent jump in inflation will quickly fall away.
‘In the United States the news has been pretty positive, but the global news hasn’t been all that positive,” Daly said. “It’s been good but it hasn’t been terrific. Markets respond to those things, and that can of course lower yields because they’re pricing in the risk there.”
She added: “What you’ve seen is an increasing sense of the downside risk to the global economy.”