San Francisco Fed President Mary Daly Signals Further Rate Hikes Amid Persistent Inflation Concerns

San Francisco Federal Reserve President Mary Daly stated on Friday that the central bank will likely need to tighten monetary policy further, though she emphasized that the timing and magnitude of additional interest rate increases remain dependent on incoming economic data.

“My expectation is we’re going to have to tighten policy further. Exactly when and how much is still to be decided because we just have to take all the variables that are coming in,” Daly explained during a live interview with CNBC’s Steve Liesman. “More is likely to be needed, and certainly … I’m prepared to do that if that’s what the economy calls for.”

These comments followed the Bureau of Labor Statistics’ report showing that the U.S. economy added 165,000 jobs in October, while the unemployment rate—a key metric closely monitored by Fed policymakers—declined slightly to 4.1%.

The employment figures significantly outperformed Wall Street estimates, with job creation nearly tripling the consensus forecast from Dow Jones.

Daly described the jobs report as “good news for American workers,” but highlighted the ongoing strain that inflation places on household finances. While average hourly earnings rose by 3.1% annually in October, the September consumer price index (CPI) inflation rate stood at 3.7%.

“They see that they can get jobs, they continue to spend. They’re not out of the game, but they are on a treadmill of high inflation,” she remarked. “This has been high for too long, almost six years, and we’re really starting to feel the burden of that spread everywhere.”

The Fed policymaker expressed confidence in overall economic growth but voiced concern over the stubborn persistence of inflation.

“The job market remains stable and solid, but not booming, and you see real wages falling because those wages are not really keeping up with inflation,” Daly noted. “I think that’s the crux of this. Good news on the jobs front, not so clear that Americans are going to gain ground in the labor market.”

The Federal Open Market Committee (FOMC) raised the central bank’s benchmark overnight borrowing rate by a quarter percentage point in September, bringing the target range to 3.75%-4%.

However, at the subsequent meeting last week, the committee opted to hold steady, choosing to wait for “the accumulation of more information” before making its next policy decision.

As Daly prepares to vote on the committee next year, she continues to advocate for a measured, gradual approach. Richmond Fed President Thomas Barkin also indicated on Thursday that higher rates are likely, though the exact timeline remains uncertain.

“I was really supportive and completely thought that that was the right move to move in September,” Daly said. “I also think that it was good to be on hold at the last meeting because the world is filled with uncertainty.”

Source link