San Francisco Fed President Mary Daly said further monetary tightening may be necessary to bring inflation under control, warning that price pressures remain broad-based and are not limited to tariffs or oil prices.

Daly said an increasing number of businesses are planning to pass higher input costs on to consumers, indicating growing willingness to raise prices.

She supported the Fed's September rate hike and its decision to hold rates unchanged in October.

Daly said AI infrastructure spending is pushing up prices in some areas, but its overall contribution to inflation remains moderate, with limited cost increases and little spillover into other sectors.

She remains optimistic that AI could boost productivity over the long term, although it is too early to determine when those gains will materialise.

New York Fed President John Williams also warned that inflation remains too high and said policymakers must take further action in the coming period to bring it sustainably back to the Fed's 2% target.

Williams cautioned that rate decisions must not unnecessarily weaken the labour market, adding that the US economy does not currently appear to be significantly out of balance.

According to CME FedWatch data cited in the report, markets assign an 84.7% probability of a 25-basis-point rate hike in December and a 15.3% probability of a 50-basis-point increase.

For cumulative rate increases through January, the probabilities stand at 24.4% for 25 basis points, 64.7% for 50 basis points and 10.9% for 75 basis points.

Key takeaway: Persistent inflation and businesses' plans to pass on higher costs are strengthening the case for further Fed tightening. Markets are currently pricing in a December rate hike, while policymakers remain mindful of risks to employment.