Fed's Daly Says Further Rate Hikes Depend on Whether Inflation Shocks Fade or Compound

San Francisco Federal Reserve President Mary Daly said Tuesday she supported September's interest-rate hike amid rising inflation risks, but whether more are needed hinges on whether recent shocks fade or compound. "If the shocks that we've experienced — tariffs, oil prices from the Middle East conflict, and then AI — if they prove to be conventional shocks where they come, they go, and they have temporary effects, then we may not need more," Daly told Axios. "But if they either compound each other or they just simply last longer than we had forecast ... then that would be a second shock on top of a first shock." Daly said AI-related demand for chips is rising and could feed inflationary pressures, making the shocks more persistent. She does not vote on rate-setting this year but participates in the Fed's policy debates in Washington.