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The Fed: Fed’s Daly says case strengthening for half-point interest-rate hike in May

Mary Daly, president of the San Francisco Fed, said in an interview with the Financial Times that the case for a half-point interest-rate hike in May has increased.

“The case for 50, barring any negative surprise between now and the next meeting, has grown,” Daly said in the interview Friday. “I’m more confident that taking these early adjustments would be appropriate.”

Daly’s comments follow a jobs report showing the U.S. added 431,000 jobs in March and the unemployment rate falling to a near half-century low.

Economists think the March consumer price data on April 12 could be a decisive report in the Fed’s decision to go perhaps with a 25-basis point move. The Fed is also likely to start to shrink its balance sheet in May and could want to move less aggressively with the benchmark rate.

Investors will turn their attention to more analysis from the Fed with Wednesday’s release of the March meeting minutes, which are expected to focus on the plan to reduce the central bank’s portfolio of Treasury bills and notes and mortgage-backed securities. This shrinking of the balance sheet will have a dampening impact on economic activity, in the way that Fed purchases boost activity.

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