Mary Daly, president of the Federal Reserve Bank of San Francisco, warned during a speech in Tokyo that three simultaneous economic shocks—tariffs, energy price spikes, and massive AI investment—could keep inflation above the Fed’s 2% target for more than five years. The US tariff rate has jumped from below 5% to roughly 11%, while AI investments continue to drive consumer demand and prices. The Fed kept rates unchanged in July 2026, maintaining a slightly restrictive stance, with no rate cuts expected while inflation stays elevated. As a voting FOMC member this year, Daly indicated that the darker scenario would force the Fed into what she called a significant policy recalibration.
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