Fed’s Daly expects further rate rises as businesses look to pass on costs

Inflation remains the "key problem" in an otherwise healthy US economy, San Francisco Federal Reserve (Fed) President Mary C. Daly said on Friday, noting that the “bias is that rates need to go up.”

While acknowledging the difficulty of judging whether monetary policy is sufficiently restrictive, Daly said that “in all likelihood we will need to raise rates.” Producers, she added, are saying that “they want to pass on costs.”

Daly signals further rate rises:

Inflation is the main problem we face.

The economy is in good shape, with inflation its one problem.

Employment is widespread across sectors, and manufacturing is enjoying a resurgence.

So far, little evidence suggests that AI is driving higher productivity.

Other technologies are enabling more output with fewer workers.

The underlying inflation rate has shifted as a result of overlapping shocks.

The balance of risks points towards a need for higher rates.

The Fed's reaction function is understood by markets.

We will most likely have to increase rates.

Whether policy is sufficiently restrictive is difficult to judge.

Inflation is being driven higher by numerous factors, which is a cause for concern.

An increasing number of producers say they want to pass costs on.

Spending by consumers has proved unexpectedly resilient.

I am watching how the gap between consumer sentiment and behaviour closes.

I would not devote much time to the Summary of Economic Projections, as it is only a snapshot.

Transparency, accountability and clarity are essential for the FOMC.

I am closely monitoring services inflation excluding housing, which is heading in the wrong direction.

Although businesses remain cautiously optimistic, inflation concerns everyone.