Daly sees no urgency for hikes while Musalem leaves door open, as September rate hike odds fall to 30 percent from 70 percent.
Federal Reserve officials San Francisco President Mary Daly and New York Fed President John Williams’ proxy, Roberto Musalem, diverged on the need for near-term rate hikes as Treasury yields remain elevated. Traders now price a 30 percent chance of a September increase, down from over 70 percent in late July.
Daly argued policy is appropriately positioned, citing moderating inflation, weaker retail sales, and job cuts. Musalem, however, suggested a July hike could prevent more aggressive action later, keeping hawkish risks alive. Both dismissed Fed credibility concerns, attributing the bond selloff to fiscal financing and AI-driven capital demand.
The split may limit further retracement in yields, even as near-term hike odds decline. Markets remain focused on whether Daly’s view reflects broader Fed sentiment or if Musalem’s stance signals lingering tightening risks.