Just-In: U.S. Fed President Hints At More Interest Rate Hikes Following CPI Report

Mary Daly, who acts as the current president and chief executive officer of the Federal Reserve Bank of San Francisco, stated on Wednesday that despite indications of robustness in the U.S. economy, contraction in the labor market —  there was still “more work to do” regarding rate hikes by the Federal Reserve. This comes after the U.S. Bureau of Labor Statistics released its much-anticipated CPI data for the month of March which puts the current inflation at 5%.

More Interest Rate Hikes Incoming?

Speaking at the Salt Lake Chamber, in Salt Lake City, the 61-year-old president believes that the Fed has all the necessary tools to reduce inflation but expects inflation to continue and end the year marginally above 3%. Daly hinted at the possibility of further interest rate hikes after she was quoted as saying:

Looking ahead, there are good reasons to think that policy may have to tighten more to bring inflation down.

This comes out as Daly’s first public statement since the collapse of the two banks last month which shook the entire banking industry and highlighted the prospect of drastically tighter credit conditions and possibly weakening the U.S. economy.

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Daly Warns Tighter Credit Conditions

Daly pointed out that although the economy was growing rapidly, both inflation and the job market remained hot. She did, however, mention impending headwinds, such as a tightening in credit and a weakening in the global economy, as being on the horizon. She also brought attention to the findings of the Federal Reserve’s “considerably” raised interest rates over the course of the past year.

The tighter credit conditions, notably with reduced bank lending in the wake of the failure of Silicon Valley Bank and others, international banking system tightening, and the Federal Reserve’s own aggressive steps will need to be regularly evaluated, according to Daly.

In the wake of Daly’s remarks, all uncertainty regarding the absence of future interest rate increases has been eliminated as market players are now in preparation for a possible rate hike of 25 basis points on May 3. This would add to the culmination of a series of rate hikes that began in March 2022, when interest rates were near zero.

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