According to a report from Zhitong Finance APP, San Francisco Fed President Mary Daly stated that the Federal Reserve will likely need to raise interest rates further to push inflation lower, and she also revealed that a growing number of businesses are considering raising their prices.
"My inclination is that we need further tightening, because you can see inflation pressures persisting, and they are no longer confined to the areas most directly affected by tariffs or oil prices," Daly said Thursday at an event hosted by the Stanford Institute for Economic Policy Research (SIEPR) in California. She noted that she is hearing from more and more businesses that say they will need to pass higher input costs on to consumers.
The Fed completed its first rate hike since 2023 in September in an effort to cool inflation that has run above the 2% target for more than five consecutive years; at the October meeting, policymakers chose to hold steady. Daly is not a voting member of monetary policy this year, but she reiterated her support for both decisions.
Hawkish Voices Sound Off in Rapid Succession
On the same day, Chicago Fed President Austan Goolsbee, Cleveland Fed President Beth Hammack and Kansas City Fed President Jeff Schmid also separately expressed concern about the stubbornness of inflation.
"My expectation is that we need to move policy to a restrictive stance to help bring inflation down," Hammack said at an event in Columbus, Ohio. Goolsbee, meanwhile, offered a new perspective on Yahoo Finance's program: the construction boom in artificial intelligence infrastructure may be overheating economic demand, which would put the Fed in an even more difficult position to push inflation lower.
Data in recent months show that price pressures are picking up across a wide range of categories, far beyond the areas directly tied to tariffs and energy costs, further intensifying policymakers' concerns. Several decision-makers have recently voiced support for a rate hike at the next meeting in December. Among them, Governor Christopher Waller said the Fed should consider a larger-than-usual 50 basis point hike; Dallas Fed President Lorie Logan said more frequent rate hikes may be needed this winter. Hammack said Thursday that if officials fall behind in the fight against inflation, they could consider more aggressive action, but she believes there is no such need yet.
Futures markets are currently pricing in a 25 basis point rate hike at each of the next three meetings, in December, January and March.
Daly on AI: It Is Indeed Pushing Prices Higher, but Not Yet the Main Inflation Driver
Daly also discussed the impact and outlook of artificial intelligence. She said AI infrastructure is "undoubtedly" pushing up price pressures, but because the increase in costs is not yet large and has not spilled over into other areas, its impact on overall inflation is currently limited.
"This is exactly what shows that overall inflation at present is driven by other variables, not AI goods," Daly said. She also reiterated that she remains optimistic about the impact of AI in driving faster productivity growth, but at this stage it is still too early to judge when all of that will happen.
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