Fed's Daly: Americans are on a 'treadmill of high inflation' and more rate hikes are coming

San Francisco Fed President Mary Daly said Friday that the central bank will probably have to raise interest rates again. "My expectation is we're going to have to tighten policy further," she told CNBC's Steve Liesman, adding that "exactly when and how much is still to be decided." Describing what high prices have done to households, she said Americans are "on a treadmill of high inflation" that has gone on "for too long, almost six years," CNBC reported.

Daly will be a voting member of the Federal Open Market Committee next year. The Fed's next decision is in December.

What she said, and what she did not

The remarks came hours after the Labor Department's October jobs report. Per the Bureau of Labor Statistics, payrolls rose 165,000, the unemployment rate was 4.1% and average hourly earnings were up 3.1% from a year earlier. CNBC put the payroll gain at nearly triple the consensus estimate. Daly called the report "good news for American workers," and FXStreet summarized her view that a solid labor market gives the Fed room to finish the inflation job.

She did not commit to a date or a size. Investing.com reported that she wants the Fed to be "deliberate but more gradual" because it does not yet know where rates need to settle. She backed the quarter-point September hike and called the pause at the October meeting appropriate, citing uncertainty. She also described the recent repricing of AI-related stocks as painful but orderly so far, according to the same report.

Daly was not the only official leaning that way. CNBC said Richmond Fed President Thomas Barkin said Thursday that he also sees higher rates ahead but is unsure of the timing. At the Oct. 28 meeting the committee held at 3.75% to 4% on a 10 to 2 vote, with Cook and Hammack dissenting in favor of a hike, as we reported in that story. Governor Michael Barr said six weeks ago that further hikes were likely in his base case, which we covered in our Barr story. Three different officials, one message.

The number behind the treadmill

Daly's image rests on one subtraction. Pay is up 3.1%; the Consumer Price Index rose 3.7% in the 12 months to September, BLS reported on Oct. 14. That is a gap of 0.6 percentage points (the two figures are for different months, so treat it as a rough guide). "You see real wages falling," Daly said, "because those wages are not really keeping up with inflation," which she called "the crux of this."

The chart shows how the path went. From the CPI index levels on FRED, our calculation puts the 12-month rate at 2.4% in January, 4.2% in May and 3.7% in September. Over the same stretch the top of the Fed's target range sat at 3.75% until the Sept. 17 hike took it to 4.00%, per FRED series DFEDTARU. So the policy rate's ceiling is now only about three-tenths of a point above headline inflation, which is a thin cushion.

One detail the headlines skip: BLS put September core CPI, which strips out food and energy, at 2.6%. The 3.7% headline figure is carrying a lot of food and energy cost. That matters for an owner, because diesel, packaging and freight are exactly the lines that sit in the gap between the two numbers, and rate hikes do not lower them directly. The October CPI report has not been published yet.

What a hike does to a business credit line

The bank prime rate has sat at 7.00% since the September hike (FRED DPRIME), exactly 3 points above the top of the target range. Many business lines of credit float on prime plus a spread, so a Fed move passes through almost immediately. Take a spread of prime plus 2%, a 9.00% rate today, interest-only on the drawn balance. Each quarter-point costs $20.83 a month per $100,000 drawn ($100,000 x 0.25% / 12):

These are our calculations on assumed balances and spreads, not quotes; your agreement sets the real spread, any floor and when the rate resets. The amounts look small next to payroll. They are not small against margin. A contractor with $250,000 drawn on a 9.00% line already pays $1,875 a month in interest, and the hikes Daly describes would take that to about $1,927 at 9.25% and $1,979 at 9.50%. For our earlier worked example of the September move, see what a 7% prime means for a contractor's line.

Fixed-rate term loans and equipment financing already signed do not change. New fixed-rate offers are priced off longer-term yields and lender risk, not off the Fed funds rate alone, so they can move before or after a hike. What readers should not read into Daly's remarks is a December commitment: she said timing is undecided, and futures odds quoted by one report are not the Fed's guidance.

What owners can do

• Know your reset terms. Check whether your line floats on prime, how fast it resets and whether there is a rate floor or cap.
• Price the next two hikes now. Multiply your average drawn balance by 0.25% and 0.50% and divide by 12. If the result strains a month, plan around it before December.
• Pay down the most expensive balance first where cash allows, since a floating balance is the one that reprices.
• Do nothing rash. Daly herself says the pace may be gradual and the size is open. A calendar reminder for the Dec. FOMC and the October CPI release is a fair first step. Our calendar has both.

Sources: CNBC, Nov. 6, 2026; Investing.com; FXStreet; BLS Employment Situation; BLS CPI; FRED series DFEDTARU, DPRIME and CPIAUCSL. Daly's remarks come from a TV interview; we did not find a prepared speech or transcript on the San Francisco Fed's site. Year-over-year CPI figures in the chart are our calculations from seasonally adjusted index levels. This is market information, not investment advice.