Fed’s Mary Daly says uncertainty around AI and growth clouds next rate move
Mary Daly said policy is slightly restrictive, but strong AI investment, a stable labor market and mixed inflation risks make the Fed’s next step unclear.
San Francisco Federal Reserve President Mary Daly said U.S. monetary policy is slightly restrictive, but uncertainty around inflation, growth and the economic effects of AI means it is not yet clear what the Federal Reserve should do next on interest rates. Speaking in Santander, Spain, Daly said there is a scenario in which the Fed may need to keep fighting inflation if price pressures prove persistent, but also a scenario in which growth weakens or investment slows. She pointed to exceedingly strong AI-related investment growth and a stable labor market as reasons for caution, and said the drop in oil prices since the Iran war ceasefire was good news for consumers and the economy. Her remarks came as U.S. labor data showed job growth slowed sharply last month, prompting traders to abandon bets on a Fed rate hike later this month and trim expectations for a move in September.
- slightly restrictive: A monetary policy stance designed to slow economic demand somewhat in order to reduce inflation.
- price pressures: Forces in the economy that push the costs of goods and services higher.
- AI-related investment: Business spending tied to artificial intelligence technologies, such as infrastructure, software or equipment.