Fed’s Daly Says More Rate Hikes Depend on Whether Tariff, Oil and AI Shocks Fade or Compound

San Francisco Federal Reserve President Mary Daly said on Tuesday that she supported the central bank’s September interest-rate increase, but that whether additional increases are needed will depend on how several inflation pressures develop, according to Reuters.

Daly pointed to three sources of pressure, according to Reuters: tariffs, higher oil prices linked to the Middle East conflict, and demand tied to artificial intelligence. In her view, if those pressures behave like temporary shocks that fade, further increases may not be necessary. If they reinforce one another, last longer than expected, or are followed by another round of tariffs, the inflation effects could persist for longer.

AI demand adds a new channel for price pressure

Reporting by Newsmax summarized Daly as warning that demand for AI computing capacity could push up costs beyond the technology sector, as companies compete for chips and related equipment. Newsmax reported that some businesses are seeking advance supply arrangements for memory chips and redesigning products to use fewer of them, a sign of concern that shortages could broaden.

Other Fed officials have raised related concerns in recent days, according to Newsmax. It reported that Governor Michael Barr said on Sept. 29 that AI investment is lifting prices for chips and equipment and that supply constraints are emerging, while Governor Lisa Cook said on Sept. 28 that data centers compete for construction labor and energy, with any productivity benefits unlikely to arrive soon enough to fully offset near-term pressure. Daly does not hold a rate-setting vote this year, according to Reuters, but participates in the Fed’s policy discussions. The Fed’s next meeting is scheduled for Oct. 27-28, according to Newsmax.

Reporting based on coverage by Reuters and Newsmax.