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(Bloomberg) — Federal Reserve Bank of San Francisco President Mary Daly said monetary policy is in a good place right now, but there’s too much uncertainty in the economy to offer a view on where rates are headed.
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“We are prepared to respond either way, whatever the economy brings,” Daly said Thursday at the Bloomberg Tech conference in San Francisco. “I think giving more forward guidance about what’s possible could be misguiding in the end, because we just have to wait for the economy to evolve.”
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Federal Reserve officials are expected to hold interest rates steady at their next meeting on June 16-17 in Washington DC, the first under new chairman Kevin Warsh. Elevated energy prices as a result of the ongoing conflict in the Middle East have also spread into goods prices such as fertilizers and equipment.
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In April the Fed’s preferred measure of inflation hit 3.8% from a year earlier, the largest increase since 2023. Policymakers are also pointing to stabilization in the labor market with unemployment standing at 4.3%.
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A growing number of officials would like the Fed to signal that all options — including both rate cuts and hikes — are on the table in the coming months.
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Investors see a rate increase as probable by the end of the year, according to federal funds futures contracts.
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AI productivity
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Daly also said while there’s still no clear evidence in the economic data of productivity gains from artificial intelligence, she remains bullish on the technology.
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“We haven’t seen widespread productivity gains yet,” Daly said. The return on investment from businesses using the technology is “still to be developed,” but companies’ enthusiasm for the technology is “tremendously,” she added.
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“I’m pretty bullish, I see the possibilities and I’m hearing more and more that people are seeing early rewards and really recognizing that next year is the litmus test,” she said.
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