Daly Sticks to Dovish Script Amid Rising Rates

San Francisco Federal Reserve President Mary Daly maintained her dovish stance on monetary policy, saying current conditions don't warrant pre-emptive rate hikes. Daly attributed the recent rise in long-term Treasury yields to global factors rather than concerns about Fed policy. She noted that short-term yields suggest financial markets continue to understand the central bank's reaction function.

Daly emphasized that policymakers remain committed to achieving their inflation objective and expressed confidence that the labor market is stable. However, she acknowledged that inflation remains above target, but argued there is currently little evidence to support a pre-emptive tightening of monetary policy.

She pointed out that recent employment and inflation reports have not materially altered her outlook and that two softer prints do not indicate that price pressures are firmly moving back toward target. Daly also downplayed the impact of AI-related spending on economy-wide inflation, suggesting its influence remains limited for now.