Analysis
Daly's comments help explain how the Fed is reading a hotter inflation report: the risk has gone up, but she sees no reason to rush a decision with a stable job market and more meetings ahead. Her view lines up with several colleagues who have signaled the Fed is unlikely to raise rates this month, and it leaves borrowers facing high rates for longer rather than a sudden move.
What she said
"We are more likely than not to need additional adjustments, but the timing of those adjustments to me is something we're still deliberating," Daly said in an interview with Reuters on Wednesday, October 14 [1]. "I don't feel urgent that we have to decide with a limited set of information. I think we have the time that we need." [1]
She said the September inflation report "suggests that the risk to inflation remains elevated," but added that "risks are not realities, and reacting on risk when you have time to make a good decision, to me, feels imprudent." [1] She said the labor market's continued stability gives the Fed room to focus on price stability [1].
The backdrop
Earlier that day, the Labor Department reported that consumer prices rose 3.7% in the 12 months through September, up from 3.4%, with gasoline driving most of the monthly increase [1]. Daly said rate futures traders first piled into bets on an October hike, then calmed after looking more closely at the data [1].
The Fed's policy rate is in a 3.75%-4.00% range [1]. Reuters reported that market pricing put about a 40% chance on a second straight increase at the October 27-28 meeting, higher than before the inflation report but no longer the most likely outcome [1].
What remains uncertain
Daly is one of 19 Fed policymakers and speaks for herself, not the committee. The interview was reported by Reuters; the Fed's decision on October 28 depends on data still to come, and market probabilities change quickly.