Daly’s comments add a somewhat more balanced tone to recent Fed commentary, acknowledging tariff driven price pressures while also flagging early signs those effects are fading, a nuance that could support market expectations for the Fed to stay patient rather than move toward hikes. Her point that an end to the Middle East conflict would help lower inflation ties monetary policy commentary directly to geopolitical developments, reinforcing how closely markets are watching the Hormuz negotiations for their inflation implications alongside their energy market impact. Her flagging of technology investment as an inflation driver is a relatively novel addition to Fed commentary, and could draw attention to how AI related capital expenditure is feeding into price data, an angle likely to resonate given recent debate over how AI linked categories are distorting core PCE readings.
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Earlier:
Daly says tariff driven inflation is starting to ease, but technology investment and the Middle East war remain key swing factors for prices.
Summary:
- Fed’s Mary Daly says tariffs have had a clear impact on inflation
- She sees some evidence that the tariff impact on inflation is beginning to fade
- Daly says an end to the Middle East war should help lower inflation
- She also says technology investment is helping drive inflation higher
Federal Reserve Bank of San Francisco President Mary Daly said tariffs have had a clear impact on inflation, though she pointed to early signs that effect is beginning to ease.
Daly’s comments add to a broader picture emerging from Fed officials this week on the various forces shaping the inflation outlook. She said there is some evidence the impact of tariffs on prices is starting to fade, a development that, if sustained, could ease one of the pressures that has kept inflation elevated relative to the Fed’s target.
Daly also linked the inflation outlook to the ongoing conflict in the Middle East, saying that if the war were to end, it should help bring inflation lower. Her comments reflect how closely Fed officials are tracking geopolitical developments, including the ongoing negotiations over reopening the Strait of Hormuz, given their direct bearing on energy prices and broader price stability.
At the same time, Daly flagged a less commonly discussed driver of inflation, saying technology investment is helping push prices higher. Her remarks point to the growing recognition among Fed officials that heavy capital spending tied to artificial intelligence and related technology infrastructure is showing up as a measurable factor in inflation data, adding a new dimension to the debate over what is driving prices beyond more traditional factors like tariffs and energy costs.
