Fed Balances Inflation Against Tightening Risks

On the monetary policy front, San Francisco Federal Reserve President Mary Daly ruled out an urgent need to raise interest rates at the October meeting, even as she acknowledged that inflation risks have increased and further adjustments may be necessary to curb price pressures. Daly emphasized that making decisions based on limited information may not be appropriate, noting that the central bank has sufficient time to assess data and balance risks before determining next steps. These remarks carry particular significance for global markets, given the sensitivity of financial assets to U.S. interest rate expectations and their impact on funding costs, investment flows, and trends in the dollar and gold. Persistent inflation above target levels could limit opportunities for monetary easing, while a slowdown in economic activity and rising risks may prompt investors to rebalance their portfolios.