Fed's Daly Says Policy Slightly Restrictive
San Francisco Federal Reserve President Mary Daly stated that U.S. monetary policy is currently slightly restrictive. Speaking at a Banco de España conference in Santander, Spain, she said strong investment growth in artificial intelligence technology and a stable labor market make the Fed's next policy move uncertain.
Daly outlined two possible scenarios for the Fed: one in which inflation proves more persistent than expected, and another where economic growth falters or investment slows because of concerns over returns. She noted that inflation has remained above the Fed’s 2 % target for six years.
She also highlighted that the recent drop in oil prices following the Iran war ceasefire is positive for the economy and consumers.
Daly’s comments coincided with the U.S. Bureau of Labor Statistics releasing data that showed job growth slowed sharply in the most recent month, prompting traders to lower expectations for a Fed rate increase in July and September.
Earlier, at a global central banking conference in Sintra, Portugal, Fed Chairman Kevin Warsh warned that the Fed will not fail in containing inflation and emphasized the impact of artificial intelligence, noting that AI is currently boosting demand but is expected to eventually increase supply, creating opposing forces on inflation.
Daly added that uncertainty about AI’s economic impact prevents her from making a quick decision on interest rates.