US Stock Market: Fed's Daly backs steady rates, says more inflation data needed before September decision

Federal Reserve Bank of San Francisco President Mary Daly on Wednesday backed the U.S. central bank's decision to keep interest rates unchanged last week, saying policymakers need more evidence before deciding whether inflation requires further action, Reuters reported.

Speaking at an economics conference in Tokyo, Daly said the Federal Reserve needs to gather additional information before its September policy meeting to assess whether current inflationary pressures stem from temporary supply-side disruptions or signal a more persistent trend.

She said policymakers should remain vigilant as fresh economic data becomes available and be prepared to act if conditions warrant.


The Federal Open Market Committee (FOMC) last week voted to leave its benchmark interest rate unchanged at a range of 3.5% to 3.75%, citing continued concerns over elevated inflation.

The decision, however, was not unanimous. Three Fed officials dissented in favor of raising interest rates, reflecting growing concerns that inflation remains well above the central bank's 2% target. In recent days, several other Fed policymakers have also argued that additional rate hikes should remain on the table if price pressures fail to ease.

Although Daly is not a voting member of the FOMC this year, she acknowledged concerns about how households and businesses could react if inflation begins accelerating again. She indicated that if inflation momentum appeared to be rebuilding, the Fed could be forced to respond more aggressively to restore price stability.

At the same time, Daly expressed confidence that recent supply-related shocks are unlikely to have a lasting effect on inflation.

According to Reuters, she said businesses now have limited ability to pass on higher input costs to consumers, reducing the risk of sustained price increases. She also noted that consumers remain highly sensitive to oil prices and suggested that the end of the conflict in the Middle East could help ease one of the key contributors to inflation expectations.

The Fed's next policy meeting in September is expected to be closely watched by investors, with incoming inflation, employment and economic growth data likely to play a crucial role in determining whether policymakers maintain their current stance or resume tightening monetary policy.

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