Fed's Daly: More Rate Hikes Likely as Inflation Stays High

TL;DR: San Francisco Fed President Mary Daly said Friday she expects the Fed will need to raise interest rates further, though the timing and size are undecided. The benchmark rate sits at 3.75% to 4% after a September quarter-point increase. If you hold rate-sensitive private assets, check their terms now.

She joined her fellow policymakers in saying the pace and timing remain uncertain.

What did the October jobs report show?

Employers added a better-than-expected 165,000 jobs in October, The Hill reports, citing the Bureau of Labor Statistics. That is a strong print.

Inflation is the catch. It has stayed above the Fed's 2 percent goal for five and a half years, according to The Hill, and it has risen this year amid the Iran war. A labor market this firm gives the Fed room to keep tightening. Years of overshoot give it the reason.

Measure	Latest reading	Source
October job gains	165,000	The Hill
Fed funds target range	3.75% to 4%	CNBC
Fed inflation target	2 percent	The Hill

That is why Daly's tone matters more than any single data point.

Where does the Fed stand right now?

She is not alone. New York Fed President John Williams said Friday that inflation remains too high, and that bringing it back to 2 percent in a timely, sustained way is "absolutely essential," The Hill reports.

What does this mean for accredited investors?

Start with the downside. A higher rate path changes the math on anything priced off interest rates. Floating-rate loans inside a private credit fund or BDC reset higher with the benchmark, so income can rise quickly. The borrowers paying that interest carry the strain. Our piece on what a rate hike does to BDC income lays out both sides, and More Fed Rate Hikes Are Coming: What Investors Face covers the path.

Liquidity is the second question. Semi-liquid vehicles can limit withdrawals when many investors want out at once. Read the redemption terms in Interval Funds: Semi-Liquid Access to Private Markets before you need them, and read the fee stack at the same time, because fees come out whether rates rise or not. For the inflation-hedge side, see Gold, Commodities, and Real Assets as Inflation Hedges.

Daly put it plainly: exactly when and how much is still to be decided. Treat any specific forecast, including one in a headline, as a guess.

What mistakes do investors make on news like this?

Hers is one voice on a committee.

The second is reading a good jobs report as good news for everyone. Payrolls grew, yet inflation has run above target for five and a half years, so household budgets can stay under strain while the Fed keeps tightening.

The third is repricing a private holding on a single speech. Private funds report valuations on a lag, so a rate move may not show up in your statement for months, and that quiet is not the same as safety. Ask the manager when the next valuation is struck and what rate assumptions sit inside it.

FAQ

What is the Federal Reserve's current inflation target?

The Fed's target is 2 percent. Inflation has been above it for five and a half years.

How does raising rates reduce inflation?

Higher rates make borrowing more expensive, which tends to slow spending and hiring. Slower demand eases pressure on prices. The effect takes time, and it comes with a risk of weaker growth.

What are the Fed's predictions for rates in 2026?

Daly said she expects further tightening, but that the timing and size are still to be decided. The benchmark range today is 3.75% to 4%, per CNBC.

Did the Fed raise rates at its latest meeting?

No.

What to do today

Pull up the redemption and rate-reset terms on your largest private or semi-liquid holding, and note what happens to income and exit timing if the benchmark rate rises another quarter point. If you want a read like this after each Fed move, the free AIN briefing sends one.

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