Daly: Ready to Move Up or Down, All Options Open
Federal Reserve Bank of San Francisco President Mary Daly said that US monetary policy is currently in a "good" position, but economic uncertainty remains too great to provide a clear indication of the next direction in interest rates. Speaking at the Bloomberg Tech Conference on Thursday (June 4), Daly emphasized that the Fed is prepared to respond in either direction—up or down—depending on incoming data.
Daly also believes that providing overly specific "forward guidance" risks misleading the market. She believes the Fed needs to wait for the economy to develop before locking in a scenario, especially amidst the still-fluctuating pressures from energy and demand conditions.
This statement comes ahead of the Fed's June 16-17 meeting, the first under new Chairman Kevin Warsh, who is widely expected to keep interest rates on hold. However, the surge in energy prices due to the Middle East conflict is said to have begun to spread to the prices of other goods such as fertilizer and equipment, adding another layer of inflation risk.
The latest data shows the Fed's preferred inflation rate (PCE) rose 3.8% year-on-year in April—the largest increase since 2023—while unemployment stood at 4.3%. With the combination of still-high inflation and a relatively stable labor market, a growing number of officials want the Fed to emphasize that all options remain open in the coming months.
From the market perspective, federal funds futures contracts indicate that investors are starting to view the possibility of an interest rate hike as a possible scenario before the end of the year, although the policy path remains highly data-dependent.
Beyond interest rates, Daly also touched on AI. He said evidence of productivity gains from AI is not yet clearly visible in economic data, but he remains optimistic about its potential. According to Daly, the benefits of AI investment are still in their infancy, and "next year" could potentially be a crucial test of whether productivity gains truly begin to pick up. (Arl)
Source: Newsmaker.id
