US Stock Market | Fed’s Daly signals patience as inflation risks linger

San Francisco Federal Reserve President Mary Daly has signalled confidence in the resilience of the U.S. economy, even as geopolitical tensions and elevated oil prices cloud the near-term outlook, Reuters reported.

Speaking on Wednesday, Daly said the economy remains on a strong footing, with consumer spending and business investment continuing to hold up despite the uncertainty triggered by the Iran conflict, according to Reuters. Her remarks suggest that, for now, domestic economic momentum has not been derailed by external shocks.

The recent surge in oil prices—sparked by the conflict—has raised concerns about a potential resurgence in inflation. However, a tentative two-week ceasefire agreement announced earlier this week has offered some relief to global markets, leading to a pullback in crude prices. Reuters reported that this development has also influenced market expectations, with traders dialling back bets on further rate hikes and once again factoring in the possibility of rate cuts later this year.


Even so, Daly’s comments indicate a cautious stance. While she acknowledged the risks posed by higher energy costs, she emphasised that inflation control remains the Federal Reserve’s primary focus, Reuters noted. Her assessment of a stable labour market further suggests there is no immediate urgency to shift toward policy easing.

The evolving situation in the Middle East remains a key variable. Daly highlighted that the duration of the conflict and the trajectory of oil and gas prices will play a crucial role in shaping the economic outlook. According to Reuters, she indicated that it is still too early to determine the broader impact, particularly in terms of spillover effects on other goods and services.

For now, Daly’s outlook underscores a balancing act for policymakers—monitoring inflation risks tied to commodity prices while recognising that the core fundamentals of the U.S. economy remain intact.