San Francisco Federal Reserve President Mary Daly said Wednesday that, despite uncertainty and market volatility tied to the Iran war, the U.S. economic outlook remains solid at its core.
Addressing the St. George Area Chamber of Commerce in Utah, Daly noted that household spending is continuing and that businesses are maintaining investment activity. Those observations, she said, underpin the Fed’s view that the economy has not shown signs of deterioration in the wake of recent geopolitical tensions.
Daly acknowledged the questions policymakers are monitoring. She recognized concerns that the conflict could push inflation higher and that labor market strength might be less robust than previously thought. But she said the Federal Reserve’s readings do not show weakening: "There’s a concern that maybe this will push inflation up: that’s our job, we’ll focus on that. And there’s a concern that maybe the labor market isn’t as solid, but we’re not seeing that, we’re seeing it kind of settle at a good place," Daly said.
The Fed official also cautioned that it is too early to determine the duration of elevated oil prices. That uncertainty in energy markets is one of the factors the central bank is watching, Daly said, without drawing a definitive timetable for how long oil will remain higher.
On policy approach, Daly emphasized the importance of resisting knee-jerk reactions to short-term market movements or headline-driven news cycles. "Important that Fed doesn’t move around as much as news, or markets, do," she said, adding that "no one likes uncertainty or volatility." Her remarks underline a preference for a measured and steady stance from the central bank in the face of episodic volatility.
Her comments highlight the dual focus facing policymakers: remain attentive to risks such as commodity-driven inflationary pressure while assessing incoming data on consumer behavior and labor conditions. For now, Daly said, the balance of signals points to an economy holding up rather than deteriorating.