San Francisco Federal Reserve President Mary Daly stated that she supported the Federal Reserve's rate hike in September and indicated that additional rate hikes may be necessary if external shocks persist. In an interview with Axios, Daly highlighted that ongoing factors such as tariffs, rising oil prices due to Middle East conflicts, and increased demand for chips driven by artificial intelligence (AI) could continue to exert upward pressure on inflation. She noted, 'If the shocks that we've experienced — tariffs, oil prices from the Middle East conflict, and then AI — if they prove to be conventional shocks where they come, they go, and they have temporary effects, then we may not need more. And I still have some probability on that.' However, Daly expressed concern that these shocks could last longer than anticipated, potentially keeping inflation elevated and necessitating further monetary tightening [1].
Daly also pointed out that AI-related demand for chips is rising, which could fuel inflationary pressures, drawing a parallel to the supply bottlenecks seen after the COVID pandemic that drove up car prices due to chip shortages. She suggested that the Federal Reserve may observe these shocks diminishing within one to three years, but if they persist, more rate hikes could be required [1].
On the currency front, the US Dollar was the strongest against the Japanese Yen, appreciating by 0.14% on the day. The USD also showed mixed performance against other major currencies, declining by 0.34% against the Euro and 0.36% against the British Pound, while gaining 0.07% against the Swiss Franc [1].
No specific forward-looking statements or analyst opinions beyond Daly's comments were provided in the article [1].
CONCLUSION
San Francisco Fed President Mary Daly emphasized the possibility of further rate hikes if inflationary shocks from tariffs, energy costs, and AI-driven demand persist. The US Dollar showed strength against the Japanese Yen but was mixed against other major currencies. Market participants may remain cautious as the Fed monitors the duration and impact of these economic shocks.