San Francisco Fed President Mary Daly recently spoke to Axios, expressing uncertainty about whether inflation is definitively decreasing and emphasizing there's no immediate need to adjust interest rates. Despite a recent cooldown in inflation, Fed officials remain cautious, as one month of data isn't sufficient to signal a lasting trend.
Daly highlighted that current policy is flexible, allowing adjustments as needed. While acknowledging signs of stalled progress in inflation, she doesn't see immediate evidence requiring upward adjustments in interest rates.
In a commencement speech at the University of San Francisco, Daly addressed concerns among students about economic uncertainty. She reassured them about the solid labor market and pockets of strength, including ongoing real wage growth.
However, challenges persist, particularly in the housing market, where rental prices continue to rise. Daly noted a structural imbalance in housing supply and demand, which affects affordability and inflation dynamics.
Despite rapid rate hikes by the Fed to combat inflation, Daly observed that the economy has remained resilient, partially due to accumulated cash reserves during the pandemic. Yet, as these reserves diminish, businesses may become more sensitive to higher interest rates.
Regarding AI's impact on job opportunities, Daly highlighted its increasing integration into businesses, particularly in back-office operations. However, concerns linger about its effect on employment levels and income growth.
In summary, while Daly remains optimistic about addressing inflation, uncertainties persist, including housing dynamics and the impact of AI on the labor market.
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