San Francisco Fed President Mary Daly said the central bank will likely need to raise interest rates further to address elevated inflation, though she sees no immediate rush. Prediction-market pricing now points to a high likelihood of another hike in 2026.
San Francisco Federal Reserve President Mary Daly said Thursday the Fed will likely need to raise interest rates further to address elevated inflation. She also indicated there is no immediate rush to act.
Speaking at the Stanford Institute for Economic Policy Research, Daly said: "My bias is that further tightening will be needed." She noted that price pressures are spreading beyond energy and goods into services, where inflation tends to be sticky.
Higher yields buy the Fed time
Daly welcomed higher bond yields and tighter financial conditions, saying they give the Fed more time to make calibrated decisions. She added that the exact timing and magnitude of tightening does not need to be decided immediately.
She also said artificial intelligence is contributing only modestly to inflation and having limited impact on the labor market. The current picture, in her words, combines a stable labor market, positive growth and productivity growth with high inflation.
Markets price in another hike
Traders are leaning the same way. On Polymarket, the probability of a second Fed rate hike in 2026 reached 89.5%, up from 66% a week earlier, according to Crypto Briefing. The Fed held rates steady in October, the outlet reported.
Daly's remarks also follow inflation data. October's Consumer Price Index rose 0.4% month over month, Crypto Briefing said. The December FOMC meeting will be a key event, and any signal of further tightening could reinforce current market pricing, the outlet added.
Sources: Investing.com, Crypto Briefing
Trading involves risk.
Risk Disclaimer
