Daly Backs Steady Rates, Cites Need for More Inflation Data Before Next Fed Decision

Federal Reserve Bank of San Francisco President Mary Daly emphasized the need for more evidence before deciding whether inflation requires further action from the US central bank. Speaking at an economics conference in Tokyo, Daly stated that policymakers require additional information to assess whether current inflationary pressures stem from temporary supply-side disruptions or signal a persistent trend.

She noted that fresh economic data will be crucial in determining the Federal Reserve's next steps, particularly ahead of its September policy meeting. The Fed has kept interest rates unchanged at 3.5-3.75%, citing continued concerns over elevated inflation. However, three Fed officials dissented in favor of raising interest rates, reflecting growing concerns that inflation remains above the central bank's 2% target.

Daly acknowledged the potential for households and businesses to react negatively if inflation begins accelerating again, but expressed confidence that recent supply-related shocks are unlikely to have a lasting effect on prices. She also highlighted the limited ability of businesses to pass on higher input costs to consumers, reducing the risk of sustained price increases.