SF Fed’s Mary C. Daly on Economic Shocks, Inflation, and Monetary Policy

Why It Matters

By integrating granular dashboards with traditional models, the Fed can better differentiate fleeting price spikes from lasting inflation, guiding more timely and calibrated monetary policy decisions.

Key Takeaways

• Conventional wisdom splits shocks into supply vs. demand, temporary vs. persistent.
• Pandemic inflation proved “transitory” forecasts were wrong, prompting deeper analysis.
• Labor‑market dashboards after the GFC helped refine natural‑rate estimates.
• Inflation dashboards now decompose demand, supply, and momentum components.
• Policy now blends models, data dashboards, and real‑time business feedback.

Summary

In a recent Hoover policy panel, San Francisco Fed President Mary C. Daly examined how policymakers assess economic shocks and decide whether to look through or react. She argued that the traditional split—identifying a shock as supply‑ or demand‑driven and judging its persistence—often fails, as illustrated by the pandemic’s “transitory” inflation that proved persistent.

Daly recounted the Fed’s response to the Global Financial Crisis, when analysts built labor‑market heat maps and dashboards to distinguish cyclical from structural factors. By aggregating dozens of indicators, they revised the natural rate of unemployment down to roughly 5.6%, showing that workers could shift industries more readily than models suggested.

Applying that lesson to inflation, Daly described a new inflation dashboard that breaks price growth into demand‑driven, supply‑driven, and momentum components, and tracks sector‑specific pressures such as tariffs and oil price spikes. Early red flags on the dashboard helped the Fed gain confidence that tariff‑driven price rises were likely temporary, while oil‑related pressures warranted closer monitoring.

The overarching message is that models provide a baseline, but disciplined, data‑rich analysis—combined with real‑world business insights—offers a clearer view of shock persistence. This approach improves the Fed’s ability to anticipate inflation dynamics and adjust monetary policy before pressures become entrenched.

Original Description

Federal Reserve Bank of San Francisco President and CEO Mary C. Daly speaks at a panel discussion the 2026 Hoover Institution Monetary Policy Conference. She discusses the data, models, and analysis that the Federal Reserve can use to support monetary policy decisions. 

Excerpted from full panel event.

Date: May 8, 2026

Time: 4:30 p.m. PT

Location: Palo Alto, CA

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0:00 Introduction: Shocks, Monetary Policy, and How to Assess Conventional Wisdom

1:02 Assessing Inflation Shocks: What Conventional Wisdom Says

1:36 Looking at Inflation During the Pandemic

2:48 Post-GFC Lessons: The Natural Rate of Unemployment Debate

4:07 Creating Labor Market Dashboards and Heat Maps

5:22 Disciplining the Data: The Beveridge Curve Analysis

7:27 Applying the Same Approach to Inflation

9:36 Building an Inflation Dashboard: New Metrics and Indicators

12:00 The Current Moment: Tariffs and Oil Shocks

13:50 Conclusion: Using Data, Analysis, and Discipline to See Around Corners