Fed’s Daly says more rate hikes are likely needed, despite a ‘painful’ tech-stock dive

Federal Reserve Bank of San Francisco President Mary Daly said on Friday that more interest-rate increases are likely to be needed to tame inflation^1,10. She said she feels the central bank will likely need to raise rates further despite a “painful” dive in technology shares^2,13.

“Underlying inflation is just more stubborn than I would like it to be,” Daly said³. She described the October jobs report as good news in a television interview, while warning on inflation^8,15. She stressed the need for further tightening, saying inflation remains elevated¹¹, and said the Fed may need to continue tightening policy to fight inflation¹².

Daly will be a voting member of the Fed’s rate-setting committee next year⁴.

Why it matters to investors

Her comments followed a jobs report showing US employers added 165,000 jobs in October⁶, with unemployment falling to 4.1%²¹. Markets priced about a 78% chance of a quarter-point Fed hike in December after the data⁶, and Treasury yields rose as the figures fueled rate-hike expectations⁴.

The October data strengthen the case for the Fed to raise rates again when policymakers meet in December, according to analysts^18,20. With unemployment at 4.1%, one assessment said, the report gives the Fed another reason to raise rates in December²¹. Warsh said last month that policymakers would be watching for “the accumulation of data” before deciding on further moves¹⁹.

Daly was not alone in sounding hawkish. New York Fed President John Williams said on Friday that inflation has been too high and persistent⁷. He struck a somewhat similar tone, acknowledging that inflation remains elevated¹⁶. Their remarks were part of a wider run of comments in which officials signalled more tightening¹⁶.

What to watch

Pressure for faster tightening already exists inside the committee. At its most recent decision, the vote was 10-2, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting because they wanted another quarter-point hike right away^5,17.

Officials have signalled more tightening after the jobs report, and rate-hike odds jumped¹⁶. Warsh’s emphasis on “the accumulation of data” means each release before the December meeting will feed into those odds^6,19. Daly framed the choice around inflation, which she said is more stubborn than she would like³. Investors will also watch whether the selloff in technology shares, which Daly called painful, deepens enough to change the committee’s view².