San Francisco Federal Reserve President Mary Daly warned Friday that the central bank may need to resume its battle against inflation, speaking at a Banco de España conference in Santander, Spain. Daly emphasized the US economy continues showing strong resilience despite inflation remaining above the Fed’s two percent target, suggesting the central bank has room to maintain restrictive policy if necessary.
The comments signal potential hawkish positioning from a typically moderate Fed voice, coming as markets have priced in multiple rate cuts for this year. Daly’s acknowledgment that fighting inflation remains a viable scenario challenges dovish expectations and could pressure equity markets while supporting the dollar. Traders should monitor whether other Fed officials echo this sentiment in coming weeks, as it may force a repricing of rate cut probabilities.
The remarks arrive amid ongoing debate within the Fed about the appropriate pace of monetary policy normalization, with recent economic data showing mixed signals on inflation progress.
FXnCO Insight
Daly’s hawkish pivot suggests traders should reduce exposure to rate-cut sensitive positions and consider dollar-long strategies until further Fed clarity emerges.
Source: FXStreet