Federal Reserve Bank of San Francisco President Mary Daly said that a resolution of Middle East tensions could help bring down inflation, potentially giving the central bank more room to adjust policy. But she also warned that continued heavy spending on technology and artificial intelligence remains a stubborn source of price pressures.
Why geopolitics matters for prices
Daly pointed to the possibility that easing conflicts in the Middle East might reduce costs tied to energy and global supply chains. Lower geopolitical risk, she suggested, could take some heat off inflation. That shift would matter for the Fed as it decides whether to cut or hold interest rates.
The tech spending headwind
Even if Middle East tensions ease, Daly noted that companies are still pouring money into tech and AI. That spending keeps demand strong and prices elevated. It's a counterweight to any relief from geopolitics, making the inflation picture more complicated.
Daly's comments highlight the balancing act the Fed faces. One factor points to lower inflation; another points to persistent pressure. Her remarks come ahead of the central bank's next policy meeting, where officials will weigh these competing forces. Investors are watching for any sign of how the committee views the trade-off.
