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UPDATE 2-Fed's Daly sees 'no pressing need' for further rate guidance

(Adds comments on inflation target)

Sept 2 (Reuters) - San Francisco Federal Reserve President Mary Daly on Wednesday signaled no urgent need to ease monetary policy further, saying markets and households understand borrowing costs will stay low until inflation accelerates and employment returns to healthier levels.

“I don’t see a pressing need in terms of a misalignment of expectations relative to our policy,” Daly said in a question-and-answer session with reporters.

A new policy framework released last week, promising the Fed will address “shortfalls” in employment and aim to push inflation moderately above 2%, went “a long way” in setting those expectations, she said.

Her remarks pushed back on the view expressed this week by former Fed chairs Ben Bernanke and Janet Yellen that the U.S. central bank will need to follow up its framework soon with clearer guidance on how long it will keep interest rates low, and how much bond-buying it intends to do.

Some analysts have also faulted the Fed for not spelling out in its new framework how much of an inflation overshoot the Fed will tolerate, or for how long.

Daly said it is that very vagueness that allows the Fed to adjust policy as needed.

“What I really want to push away from is this idea that there’s a rule,” she said. “I don’t have a specific number in mind because to me that would tie me up and constrain me.”

The Fed next meets to set policy in mid-September.

Daly acknowledged “we can always do more forward guidance” and bond-buying when the economy actually could benefit from the boost.

Right now, she said, the labor market is in a “deep hole” after massive job loss during the pandemic shutdown, and cannot fully recover until the virus is better controlled.

Congress needs to take “forceful action” to provide fiscal aid, she said. (Reporting by Ann Saphir; Editing by Leslie Adler and Christopher Cushing)

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