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Mary Daly says inflation may slow without more rate tightening

Daly said the Fed needs more evidence before September, citing limited business pricing power and the potential for lower oil prices if the Middle East conflict ends.

Reported · Written up by our desk · Central Banks

San Francisco Fed President Mary Daly said there are growing reasons to expect inflation to moderate without additional monetary tightening, arguing that businesses are increasingly finding it difficult to pass higher costs on to consumers, according to Action Forex.

Speaking at an economics conference in Tokyo, Daly said she is “completely supportive” of the Fed’s decision from last week to keep interest rates unchanged, and stressed that policymakers still need more evidence to determine whether inflation reflects temporary supply shocks or more persistent forces.

Daly pointed to what she called “limited pricing power” among businesses and said there are “good reasons” to believe the supply-driven shocks behind inflation will not have a lasting impact.

She added that an eventual end to the Middle East conflict could lower oil prices and ease one of the public’s key inflation concerns, while also warning that patience should not mean complacency as the Fed remains prepared to act if inflation turns out to be more persistent than expected.

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