Federal Reserve Bank of San Francisco President Mary Daly said Wednesday that inflation pressures tied to tariffs are starting to fade. The comments offer a rare note of optimism from a central banker who has spent much of the past year warning about the persistent threat of trade-policy-driven price increases.
What Daly said
Speaking at an event in San Francisco, Daly told reporters that the data she's watching shows “signs of easing” in the inflation that tariffs have been stoking. She didn't offer specific numbers or a timeline, but her tone was notably less alarmed than in previous public appearances. The Fed official pointed to recent supply-chain improvements and a leveling off in some import costs as reasons for the shift.
Daly's assessment could influence how the Federal Reserve approaches interest rates in the coming months. If tariff-driven inflation really is cooling, the central bank may feel less pressure to keep rates high or even raise them further. Markets have been betting on a rate cut later this year, and Daly's remarks might reinforce that expectation — though she stopped short of endorsing any specific move.
The Fed has been walking a tightrope: trying to tame inflation without choking off economic growth. Tariffs, which raise the cost of imported goods, have been a wild card. If that factor is now receding, the Fed's job gets a little easier.
What's behind the easing
Daly didn't name specific countries or products, but the broader picture is clear. Many of the tariffs imposed over the past few years have been on Chinese goods, steel, aluminum, and other industrial inputs. Recent trade negotiations and a slowdown in new tariff announcements have helped stabilize prices. Businesses that had been stockpiling inventory to avoid higher costs are now working through those stocks, which also takes pressure off prices.
Still, Daly cautioned that the easing is not a done deal. “We need to see this continue,” she said. “One quarter of data does not make a trend.”
What comes next
The Fed's next policy meeting is in late July. Between now and then, officials will get two more inflation reports — the Consumer Price Index and the Personal Consumption Expenditures price index. Daly said she'll be watching those closely. If the data confirms the trend she's seeing, the conversation at the Fed could shift from “how high” to “how long” rates need to stay where they are.
