Economy 3 min read By Callum Montgomery
Daly says Fed will likely need to raise rates as inflation worsens
San Francisco Fed President Mary Daly says the central bank will probably have to raise interest rates as inflation worsens, while another policymaker has floated a larger December increase.
Federal Reserve official Mary Daly has said the central bank will likely need to raise interest rates as inflation worsens, adding to signals that policymakers are preparing for further tightening. Her comments point to a continued focus on bringing price growth back under control, even at the cost of higher borrowing costs for households and businesses.
Separate reporting on the policy outlook indicates that Fed Governor Christopher Waller has floated the possibility of a larger rate increase at the December meeting. The option under discussion is a hike of 50 basis points, which would be a bigger step than the quarter-point moves the Fed has often favoured in recent decisions. The additional coverage ties that possibility to persistent inflation pressures, suggesting that the debate inside the central bank has moved beyond whether to tighten further toward how forcefully to do so.
The Fed has been raising its benchmark rate in an effort to cool demand and bring inflation down toward its long-term target of 2 per cent. Officials typically weigh incoming data on prices, employment and economic activity before each policy meeting, and the balance between those indicators shapes the size and timing of any move. Daly's remarks suggest that, in her view, inflation has not yet eased enough to justify a pause in the tightening cycle.
The distinction between a standard quarter-point increase and a 50 basis point move matters for the wider economy. A larger step would signal greater urgency about inflation and would tighten financial conditions more quickly, affecting everything from mortgage rates and car loans to corporate borrowing and the value of equities. Investors often read such differences in size as clues about how long officials expect rates to stay high.
It remains uncertain how the Fed will ultimately act. The primary article text was not available for this report, so the exact wording of Daly's comments and the specific data behind her assessment could not be independently confirmed. No final decision on the December meeting has been made, and policymakers are expected to keep reviewing economic developments before settling on a course.
For businesses and borrowers, the prospect of further increases means that mortgage, loan and credit costs may remain elevated for longer. Markets tend to react closely to signals from Fed officials, because expectations about future rates feed into the broader cost of money across the economy. Any indication of a larger move in December would be watched closely by investors and lenders alike, and would likely shape pricing decisions well beyond the financial sector.
Source: investing.com
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