April 8 - San Francisco Federal Reserve President Mary Daly told attendees at the St. George Area Chamber of Commerce in Utah that the U.S. economy is, at its core, "in a good place" even as sharply higher oil prices connected to the war in Iran have injected uncertainty into the outlook.
Addressing local business leaders, Daly pointed to ongoing activity in household and corporate spending as evidence of a resilient economy. "What weve seen is consumers are still spending, businesses are still investing," she said, framing that strength as a counterweight to worries stemming from the geopolitical shock.
At the same time, Daly acknowledged risks tied to energy costs. "Theres a concern that maybe this will push inflation up: thats our job, well focus on that. And theres a concern that maybe the labor market isnt as solid, but were not seeing that, were seeing it kind of settle at a good place," she said, highlighting how those two worries intersect for policy makers.
A deal struck Tuesday for a two-week ceasefire in Iran raised hopes for a prolonged settlement and sent oil prices dropping. Market moves accompanying that development shifted some traders away from pricing in a near-term Fed rate increase to again considering the possibility of a rate cut later in the year.
Daly did not appear prepared to assume those market swings reflect a settled outlook. Observers noted that her assessment of a stable labor market undercuts immediate pressure to loosen policy, while her stated focus on keeping inflation under control points to a more cautious stance rather than a rush to ease.
She declined to lay out an explicit view on the appropriate future path for interest rates. "I see the underlying fundamentals of the economy as really in a good place," Daly said, then turned to the open questions tied to the conflict. "The question is whats going to happen with the war? How long will prices of oil and gas stay elevated and what will ...the knock-on effects be in terms of other goods and services?"
Daly emphasized that answers to those questions remain unknowable for now because they depend on how long the conflict endures. "Importantly, we do know that the underlying fundamentals of the economy remain solid and those are things that are important to how we see inflation progressing over time and how we see the labor market progressing," she said, reiterating that those fundamentals will be central to the Feds assessment going forward.
Her remarks underscored a combination of confidence in current economic footing and caution about the effects of external shocks on price pressures and activity across sectors.