FED'S DALY SAYS THERE IS AN INFLATION PROBLEM BUT AI IS NOT DOING MOST OF THE DRIVING, THAT THERE IS A RISK AI COULD CONTRIBUTE MORE TO INFLATION, AND THAT AI IS HAVING A LIMITED IMPACT ON THE LABOR MARKET, WITH A DEEP AI PIPELINE THAT CONTINUES EVEN IF IT SLOWS

San Francisco Fed President Mary Daly said inflation remains a problem but that artificial intelligence is not the main driver of it, while flagging a risk that AI could add to price pressures over time and describing its effect on the labor market as limited so far. The message frames AI as a secondary, forward-looking inflation factor rather than a current one, which means the transmission runs mainly through expectations and potential productivity-driven demand rather than through observable price data today. For rates markets, the signal reinforces that the Fed's reaction function remains anchored to broad inflation readings rather than to a single technology narrative, so front-end pricing stays sensitive to core services and wage data instead of AI-specific developments. Equities with heavy AI capital-expenditure exposure could see sentiment shifts if policymakers begin treating AI-driven demand as a durable inflationary force, while labor-intensive sectors would be watched for any evidence that displacement is accelerating faster than Daly's assessment implies. The next concrete catalyst is the monthly Personal Consumption Expenditures price index and the accompanying employ

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