Reuters reports that San Francisco Federal Reserve Bank President Mary Daly said on Thursday that a 50 basis point interest rate hike in September "makes sense" given recent economic data including on inflation, but that she is open to a bigger rate hike if data warrants.

''Saying that she does not want to be 'headfaked' by the recent improvement in inflation readings, Daly told Bloomberg TV in an interview that she has an "open mind" on the possibility of a 75 basis point hike.

Financial conditions need to remain tight to continue to bridle economic growth and bring down inflation, she said.''

Earlier, Daly had already been reported by the FT saying that she did not rule out a third consecutive 0.75 percentage point rate rise at the central bank’s next policy meeting in September, although she signalled her initial support for the Fed to slow the pace of its interest rate increases, the Financial Times reported.

"We have a lot of work to do. I just don’t want to do it so reactively that we find ourselves spoiling the labour market," the central banker said while also indicating that she would be watching the next consumer price and non-farm payroll reports to better calibrate her decision.

Meanwhile, Thursday's data showed US producer prices (PPI) unexpectedly fell in July amid a drop in the cost of energy products. This followed Wednesday's surprise news that consumer prices (CPI) were unchanged in July due to a drop in gasoline prices. Both the greenback and US Treasury yields rallied after dropping sharply earlier. DXY is back trading around 105.10. 

 

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