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Federal Reserve Bank of San Francisco President Mary Daly indicated in an interview with Reuters that the Fed may consider rate cuts if inflation remains high but the Iran conflict is resolved quickly, leading to lower oil prices. Daly emphasized that the central bank’s decisions will hinge on whether inflation shows signs of easing and if energy prices stabilize. She noted that while the Fed is prepared to hold rates steady if inflation persists, a swift resolution to geopolitical tensions could create conditions for monetary easing.
This statement adds uncertainty to market expectations about the Fed’s rate path. Traders are closely watching how geopolitical risks and energy prices interact with inflation data to shape policy decisions. A potential rate cut would likely boost risk assets like equities and commodities while weakening the US dollar. However, if inflation remains stubbornly high, the Fed may delay action, prolonging market volatility.
Investors should monitor upcoming inflation reports and oil price movements for clues about the Fed’s next steps. The interplay between geopolitical developments and economic indicators will be critical in determining whether the Fed pivots toward rate cuts. For now, the central bank appears balanced between inflation control and economic stability.
