San Francisco Federal Reserve President Mary Daly backed the September interest-rate increase, citing rising inflation risks. She said further hikes now depend on whether tariffs, Middle East-driven oil prices, and AI-linked chip demand prove temporary or persistent.
Daly ties further hikes to three shocks
San Francisco Fed President Mary Daly told Axios on Tuesday that she supported the September interest-rate increase as inflation risks have risen. She said the need for additional rate hikes hinges on tariffs, oil prices tied to the Middle East conflict, and artificial intelligence effects.
Daly said if these shocks behave like conventional disruptions, more increases may not be needed. According to Investing.com: "they come, they go, and they have temporary effects", and she said she still assigns some probability to that outcome.
Compounding shocks could change the outlook
Daly warned that compounding shocks or longer-lasting effects could alter the Federal Reserve's path. She pointed to the possibility of a second round of tariff negotiations producing additional tariffs, which she said would represent a second shock extending the timeline of economic impact.
Daly also said AI-related demand for chips is increasing and could add to inflationary pressure, potentially making the effects of the current shocks more persistent. She does not vote on rate-setting this year but takes part in the Federal Reserve's regular policy debates in Washington.
Source: Investing.com
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