Federal Reserve Bank of San Francisco President Mary Daly stated her backing for the monetary policy committee’s recent decision to maintain borrowing costs, according to remarks delivered at an economics conference in Tokyo. She indicated the central bank required additional information ahead of the following month’s policy meeting to assess whether current inflation pressures stem from transitory supply disruptions or reflect a more entrenched price environment.
Daly emphasized the importance of remaining attentive to incoming economic data while staying prepared to implement policy adjustments if circumstances warranted. The policy committee had voted to keep its interest rate target in a range between 3.5% and 3.75%. Three officials had dissented from this decision, favoring rate increases given the elevated inflation readings. Several other Federal Reserve officials have advocated for openness to raising rates or implementing increases to address price pressures relative to the central bank’s 2% target.
Addressing concerns about public perception, Daly noted she worried about how consumers and businesses might react if inflation gains appeared to be accelerating again. She cautioned that if momentum in price increases seemed to be mounting, the central bank might need to respond with forceful action to restore inflation to its target level.
Daly cited reasons for optimism regarding supply-driven economic shocks, suggesting these factors would not produce lasting inflationary effects. She noted that companies currently faced constraints on their ability to raise prices and would have difficulty shifting elevated input costs to consumers. Additionally, Daly observed that consumers focused heavily on energy prices when assessing inflation, and a potential resolution of Middle East hostilities could diminish that contribution to overall price pressures.
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