Fed's Daly: need for more hikes hinges on what happens with shocks

Fed's Daly: More Interest Rate Hikes Depend on Persistence of Inflation Shocks

San Francisco Fed President Mary Daly Discusses Future of Interest Rate Policy

Support for September's Interest-Rate Hike Amid Rising Inflation Risks

Oct 6 (Reuters) - San Francisco Federal Reserve President Mary Daly on Tuesday said she supported September's interest-rate hike in the face of rising inflation risks, but feels that whether more are needed depends largely on whether the shocks that have been pushing up on inflation look set to fade or, conversely, continue to compound. 

Temporary vs. Persistent Inflation Shocks

"If the shocks that we've experienced — tariffs, oil prices from the Middle East conflict, and then AI — if they prove to be conventional shocks where they come, they go, and they have temporary effects, then we may not need more. And I still have some probability on that," Daly told Axios in an interview. "But if they either compound each other or they just simply last longer than we had forecast that they would ... if we have a second round of tariff negotiations that result in more tariffs, then that would be a second shock on top of a first shock. That would extend the period of time over which those shocks would play out."

AI-Related Demand and Inflationary Pressures

Daly said that AI-related demand for chips is rising and could feed inflationary pressures, making the effect of the shocks more persistent.

Daly's Role in Fed Policy Debates

Daly does not vote on rate-setting this year but takes part in the Fed's regular policy debates in Washington. 

(Reporting by Ann Saphir；Editing by Chizu Nomiyama )