Fed's hawkish camp heats up rapidly! Daly: Further rate hikes needed to curb inflation, companies are brewing price increases to pass on costs.

San Francisco Fed President Mary Daly said the Fed will likely need to raise interest rates further to push inflation down furtherand she also revealed that a growing number of companies are considering raising prices. "My inclination is that we need further policy tightening, because you can see inflation pressures persisting and they are no longer confined to the areas most directly affected by tariffs or oil prices," Daly said Thursday at an event hosted by the Stanford Institute for Economic Policy Research (SIEPR) in California. She said she is hearing from a growing number of businesses that they will need to pass higher input costs on to consumers. The Fed completed its first rate hike since 2023 in September in an effort to cool inflation that has been above its 2% target for more than five years; at its October meeting, policymakers chose to hold steady. Daly is not a voting member on monetary policy this year, but she reiterated her support for both decisions. Hawkish voices sound in quick succession On the same day, Chicago Fed President Austan Goolsbee, Cleveland Fed President Beth Hammack and Kansas City Fed President Jeff Schmid also each expressed concerns about the persistence of inflation. "My expectation is that we will need to shift policy to a restrictive stance to help bring inflation down," Hammack said at an event in Columbus, Ohio. Goolsbee, meanwhile, offered a new perspective on Yahoo Finance: the construction boom in artificial intelligence infrastructure may be overheating economic demand, which would put the Fed in a position where it is "even harder" to push inflation down. Data in recent months show price pressures picking up across a broad range of categoriesfar beyond the areas directly tied to tariffs and energy costsfurther intensifying policymakers' concerns. Several policymakers have recently voiced support for raising rates at the next meeting in December. Among them, Governor Christopher Waller said the Fed should consider a larger-than-usual 50-basis-point rate hike; Dallas Fed President Lorie Logan said rates may need to be raised more frequently this winter. Hammack said Thursday that if officials fall behind in the fight against inflation, more aggressive action could be consideredbut she believes that is not yet necessary. Futures markets are currently pricing in a 25-basis-point rate hike at each of the next three meetingsDecember, January and March. Daly on AI: It is indeed pushing up prices, but has not yet become the main inflation driver Daly also discussed the impact and outlook of artificial intelligence. She said AI infrastructure is "without question" pushing up price pressures, but because the cost increases are not yet huge and have not spilled over into other areas, the impact on overall inflation is currently limited. "That is exactly what shows that current overall inflation is being driven by other variables, not AI goods," Daly said. She also reiterated that she is optimistic about the impact of AI in driving faster productivity growth, but that at this stage it is still too early to judge when all of this will happen.