Fed's Daly: In all likelihood, we need to raise rates

San Francisco Fed President Mary Daly, speaking in her capacity as a Federal Reserve official, said that in all likelihood the central bank needs to raise interest rates, a hawkish signal that runs against expectations of an imminent pause or easing. The statement points to a transmission channel centred on inflation repricing: if policymakers judge that price pressures remain above target, markets must lift their expected path for the policy rate, which widens the front-end yield curve and strengthens the US dollar through higher real rate differentials versus other major central banks. Rate-sensitive assets are most exposed, including long-duration Treasuries, growth equities whose valuations are sensitive to discount rates, and interest-rate-sensitive sectors such as housing and regional banks. Traders should watch the upcoming US CPI and PCE inflation releases, along with the next FOMC communication and dot plot, for confirmation of whether the inflation trajectory supports a further tightening bias.

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