Daly: Inflation Not Over Yet
San Francisco Federal Reserve President Mary Daly emphasized that the US central bank cannot "abdicate" its primary mission: lowering inflation and ensuring it remains on track toward its 2% target. At an event at San Jose State University on Tuesday (February 17th), Daly argued that moderate to slightly tight monetary policy is still necessary to ensure that inflation declines do not stall.
Daly also raised an issue that is becoming a major market topic: artificial intelligence (AI). She believes AI has the potential to help by increasing productivity—which could ultimately curb price pressures. However, Daly emphasized that the Fed must "dig deeper" to ensure that AI's impact is real and pervasive throughout the economy, as many current macroeconomic studies still find limited evidence of AI's effects (perhaps due to early adoption or the need for time to be felt).
Daly, on the other hand, warned about labor market vulnerabilities. She noted that recent job creation has tended to be driven by a narrow range of sectors—and if this concentration worsens, "vulnerabilities" could turn into broader fragility. The message is clear: the Fed is not only monitoring inflation, but also ensuring that improvements don't come at the expense of the job market.
Daly's statement comes as the market awaits further clues from the FOMC Minutes and the Fed's preferred inflation data, the PCE, to gauge when the next easing is reasonable. In this context, Daly outlined the following: AI could be a driver of disinflation, but it's not an automatic reason to ease policy—at least until the data actually speaks for itself.
Source: Newsmaker.id
