Remarks from Mary C. Daly at the 2025 Anchorage Economic Summit

Mary C. Daly:

So good afternoon everyone. This is a huge crowd. Really terrific. I really appreciate the introduction, I love the presentation and I have to say, it’s a complete pleasure to be back in Alaska and to be here at the Anchorage Economic Summit. I’ve been looking forward to this since the day they asked me to come. I see many familiar faces in the audience, people I have known for a long time, and those I have only met recently. And on behalf of the Federal Reserve Bank of San Francisco, I want to thank you for helping us understand your economies and your communities. And to all of those who I’ve yet to meet, I thank you for taking the time today. I look forward to a great discussion.

Now, as a kid growing up in Baldwin, Missouri, I dreamed of going to Alaska someday. I actually had a huge map on my wall and I looked at it all the time. I liked the vastness, the connection with Canada and Asia. It made it feel very international. The history of exploration, which I read about in all the encyclopedias, and perhaps most of all, I liked the resilience. I thought it was just so resilient to be able to live mostly in the dark in the winter and mostly in the light in the summer. That’s not something we had in Missouri. And when I finally visited for the very first time as an adult, I realized I had missed the main feature of the state, the people, Alaska native peoples who have been here since the beginning and generations of others who have come here and made it their home. What I loved the most is that everyone was organized collectively, invested in fostering the opportunities and the communities that have come to define the place. And so that is why I’m so delighted to be here to discuss Alaska’s economic future.

I want to start with the bottom line of my talk. If you remember nothing else today, I want you to remember this. I see Alaska’s future is bright. I’ve actually been here three times this year, and every time I come, I become more optimistic. The ingredients of success are all right here. Great natural resources, breathtaking beauty, a history of reinvention, and most importantly, a rugged people. Now, my dear friend Carol Gore says the word is actually scrappy. You can choose what describes you. I love scrappy myself, but I take it all as a compliment because it ultimately is something that endures, has grit and delivers, not just for the generation here today, but for the generations to come. What I’d like to tell you today is you will not be alone. I have observed many communities across the Federal Reserve’s 12th District, which is the nine westernmost states, and they’ve made these kinds of transitions, meeting the challenges of a dynamic and changing economy. And while there is no single playbook or path, there are some fundamental strategies and practices that I’ve seen contribute to success, and that is my topic for today.

But before I talk about strategies and practices, I want to talk about the future of our nation because ultimately, the future of state depends importantly on the outlook for the US economy. So let me start with a brief overview of how I see our economy in the nation and monetary policy, which is, of course, the job I have. So Congress has given the Fed two goals, full employment and price stability, as Katie said. And I see two dynamics going on right now that affect directly these mandates. First is the Fed’s stance on interest rates, what we call monetary policy, and the slate of recent policy changes taken by elected officials. I’d like to start with monetary policy.

As you know, in March of 2022, the Fed began raising interest rates to fight rising inflation. This campaign has largely been successful, slowing growth, cooling the labor market and bringing inflation closer to our 2% goal. But the job is not done and we need to finish it. Inflation is still above target, and so that is why interest rates are currently set in a modestly restrictive stance. So that’s one backdrop. The second dynamic is policy changes, including tariffs, immigration restrictions, tax cuts and deregulation, and they’re also affecting the economy. Frankly, it’s going to take some time for the full effect of those four things to show up in our net basis on the economy. It just takes a while for those types of policies to work themselves into the economy, and it takes a while for us to know their impact. But we can already see early signs of two policies, tariffs and immigration.

Tariffs and immigration together are showing through, as we like to say in economics, they’re showing through, they’re peeking their head into the data that we collect. It’s pushing inflation up and reducing the pool of available workers that firms can look to. So these two different dynamics, the monetary policy and the policy changes coming out of DC, pose challenges for monetary policy. First, they’re moving the economy, particularly inflation in different directions. Monetary policy is pulling inflation down while tariffs are pushing it up. But even more importantly than that dynamic is that recent policy changes have created considerable uncertainty. I’ve been touring, as I said, come to Alaska three times, and what I’ve been hearing is that the uncertainty is the word of the day. I guess it was on the bingo card, you should put it on your bingo card. But definitely uncertainty is important. And uncertainty makes it harder for firms and households to know what they’re doing next, which makes it harder for us as policymakers, Federal Reserve policymakers, to know exactly how the economy will evolve.

And all of this makes monetary policy decisions more difficult. We don’t have perfect clarity, but yet we have to make policy that acts with a lag. To reassure you, and just to state a fact, central banks rarely have perfect clarity. It’s not like this time is that different than other times. But the most important thing is that we can’t wait to act. If we wait to act on our policies, we find ourselves often too late. So we have to live with the uncertainty and decide anyway. So my own assessment is that the risk to our employment and inflation goals are roughly in balance at this point. Inflation, absent tariffs has been gradually coming down. And with a slowing economy and ongoing restrictive monetary policy, it should continue to do so. Tariffs will boost inflation in the near term, and you’ve already seen that effect, but likely not in a way that is persistent, that would mean monetary policy has to offset it.

At the same time that inflation dynamics are occurring, the labor market has softened, and you can see this everywhere in the US economy and here as well. And I would see additional slowing in the labor market as an unwelcome sign, especially since we know, and I think importantly because we know, that once the labor market stumbles, it falls, and it falls quickly and it falls hard, so you don’t want to get into that situation. So all this means as you put it together that I think we’ll likely need to adjust the policy rate sometime in the coming months, recalibrating it to match the collective risk that we face with both of our mandated goals. That’s my outlook for the national economy and for monetary policy. And it is vital to how any state thinks of its own growth and any city thinks of its own growth.

But as you know, that’s only part of the job. And I see this is particularly true for Alaska and Anchorage, where the economic fortunes are more closely tied to global things like commodity prices and to federal spending plans, which are typically on a business cycle frequency. So then what are the strategies to create a more durable economy, one that thrives in a variety of situations? Well, I will share three that have been important in other communities that have taken this same journey. The first is to diversify. Now that’s a word I’ve heard so frequently, it’s competing with uncertainty. In all my meetings with you, everyone talks about diversification. Importantly, that does not mean abandoning the things you do well, including natural resource extraction, strategic defense, tourism, and so many others as the presentation showed you. But rather it means looking for opportunities to invest in additional industries that hedge against the ups and downs in your core sectors.

Now, as I said, I’ve seen plenty of examples of this type of diversification and this type of change across the 12th district. Oregon developed a more tech-oriented economy in the 1970s, specifically to offset some of the volatility in their natural resources sector. Southern Nevada is currently investing in data centers because they want to augment their presence in tourism, gaming, and entertainment and offset some of the cyclical declines there, the cyclical boom and bust. And there are many, many more examples that I could share. You all here will decide what is right for Alaska and what is right for Anchorage. But the point is always the same, purposeful, intentional diversification expands economic opportunity and ultimately creates more durability. And this brings me to my second strategy, forward focus, looking ahead, finding things that are in their beginning stages, not things that have already been done, finding things where you can be one of the first and not just adopting things that others have already experimented with.

Now, a great example, if you’re wondering what this would look like, a great example comes from the Alaska Small Business Development Center. They recently shared with us in a round table how investment in broadband and satellite-based internet as well as publicly available generative AI models have helped them. They’ve helped them create new opportunities to grow their businesses, to grow small businesses, to look for new markets, to do things better and faster and less expensively. Importantly, it’s about the combining of people and technology that just increases the output of these businesses. Now, I see that as a really interesting sign because generative AI is one of the things that is brand new. And we’re not all trying to deploy or build models, new models that compete with some of the main models, but there is a deployment component, deploying it to make businesses better and expand their range even if you don’t have all the workforce that can do it.

And then importantly, it’s also about thinking what we don’t even know how it will help us. I think of the iPhone. When the iPhone came, it was just a better version of the BlackBerry. It didn’t have a keyboard, it was virtual, but now look at what the iPhone does. Many of us, I’m sure, did not dream of what was going to be capable with the iPhone when it just started to look like a new BlackBerry. So this is the kind of mindset to have. Of course, additional investment is needed to fully scale this type of technology or any other technology and make it something that this whole state can do and you’ll participate in. It makes everything better. You’ll need ongoing investments, as everybody does, in broadband and satellite-based internet. But that’s a specific issue here in Alaska, and making sure that every remote area has it, not just ones that happen to be close to a major city, and every household has it.

But importantly, it’s also going to take something else, and I would see this as the critical investment in these types of things, and I think it applies to whatever you all decide will be the thing that is your next move, you have to invest in people and training. People are the best asset that any state has and any city has, and that’s very true here in Anchorage. So investing in people is a direct investment in the economy. Investing in the skills that make them durable makes your economy durable. So let me conclude with a final strategy, which frankly isn’t a strategy at all, it’s a mindset. You have to believe. Believe that your progress is possible, that you can craft it as a collective group, and that 10 years from now, things will look different and better in your mind than they do today.

Ultimately, this is what I’ve learned in all my travels and all my time working for the Federal Reserve Bank of San Francisco, belief leads to intention. It’s the very foundation of it. Belief is important. It leads to intention, intention leads to investment, investment leads to progress. And in the end, the main message of my talk today is that it all comes back to you. You have the chance and the responsibility, really, to ensure that Anchorage 10 years from now looks different than Anchorage does today, and it is something you’re proud of and you can pass along to the next generation. So thank you so much for having me. It’s a complete pleasure.

Katie Berry:

I’m supposed to be mic’d up here, and I am. That’s excellent.

Mary C. Daly:

It works as it should.

Katie Berry:

Exactly. Well, thank you so much, President Daly for your remarks for being with us today. We’re going to go into some questions for President Daly that I have right here in my sneaky pocket. First of all, both the president and I have said this numerous times today, but the Federal Reserve has these two big things that they look at, inflation and unemployment, they’re very widely publicized, but I know that the Federal Open Market Committee looks at all kinds of different things as you’re wrestling with how to set monetary policy. So how do you bring the average person’s experience of the economy through housing and childcare and all of these things that are so important to the FOMC and to what you’re doing there?

Mary C. Daly:

It’s a terrific question, and it’s probably the most critical one. So Congress did give us two goals, price stability, and full employment, but we have to achieve those goals by understanding the lived experience of people in the economy. And importantly, when the Federal Reserve was first set up in 1913, the people who were responsible for that recognized that you can’t just be D.C focused, you actually have to think about the economy across the United States. And so we have 12 Federal Reserve banks. I run the one that’s about the Western United States. I run the 12th district. And Federal Reserve Bank presidents and their teams who are out in the economy, studying economists, engagement officers, people who understand the community, our responsibility is to collect information.

So we collect information not only on the wide array of data that are available, and then we have history and models, we have all of those things, and then we have conversations, CEO round tables, members of our boards and councils, times when we spend time with the community members, visiting the places in cities and in rural areas across the United States. I’m in all the states in my district on a regular basis, as are my teams. And the reason for that is so that we can understand firsthand what you are in particularly thinking about, what you see as your opportunities, what you see as your challenges, but also how do you see the economy today? There’s an interesting statistic we just heard that people feel decently, pretty good about their own situation, but pessimistic about the economy. We need to understand why. What are you seeing as you look out? Businesses are making decisions today about what they’re going to do at the end of the year. We need to know what those are. We need to know how households are feeling. Are they feeling strapped? Are they feeling like they have enough disposable income?

And the data alone, looking at the published data, not all the micro data, you could look at a hundred series and you would never have the complete picture. So the way I hope you’ll think about data as you hear this is that data are not just a number in a book, data are numbers in books and conversations that we can put together and really understand how everyone in this room and all the other members of the community are really feeling about not only their economy, but the national economy.

Katie Berry:

Well, that’s really helpful. And part of that question is that I know myself as a born and raised Anchorageite, I kind of bristle sometimes, and we have guest speakers who come up and say, “Gee, this is the first time I’ve been here.” So I really wanted to highlight that you’re here often and have been for a very long time. We’ve also referenced the 12th district of the Federal Reserve, and if you have your map in mind, President Daly said this is the Western United States, but it’s an incredibly diverse set of states. So we’ve got the Western United States, Alaska, Hawaii, and then even territories like Guam. So how does that diversity of your district inform what you bring to the FOMC as distinct or different from other regions?

Mary C. Daly:

So something that I regularly say, because I believe it into my heart, is that the diversity of the United States is something we need to appreciate and also utilize in thinking about how the economy works. So I am fortunate to have the 12th district where there are… I have the inter mountain States, think of Utah, Nevada, Arizona, those are, Idaho, very different in landscape, in where they’re located in the country and what they do in terms of their prosperity than the coastal states, California, Oregon, Washington, and then of course very different than Alaska and Guam and Hawaii. So you put all that together and how does that diversity help me? Well, it really helps in trying to appreciate what is the central theme that comes out of all of those states. Monetary policy cannot be made for a specific state or a specific region. It has to be made for the nation.

So in order to understand if it’s going to be effective for the nation, we have to understand how it might impact all the states that we are responsible for. And that means my colleagues and I from the Reserve Banks, we go to the FOMC and we talk about what we’re seeing in our districts, but not as a way to say, let’s figure out which policies are good for the districts like trading, it’s really to say, what are the trends that we see across all states that would help us understand what’s happening in the nation? So I’ll give you an example. Right now, no matter where I travel, very different, I see this sense of cautiousness, concern about the uncertainty, exactly not wanting to get too much inventory only to find that you can’t sell it because consumers are tired or they don’t want to pay the higher prices. Those are the things that are just universal.

The mayor mentioned counting cranes, so that’s a hobby of mine, I count cranes. It’s an important hobby though. It’s part of my job. So wherever I go, I count cranes. And I keep track of how many cranes are coming up and how many cranes are there but not active, and how many fewer cranes or more cranes have been there over time. So I put all that together and then I can bring it to the FOMC and say, yes, people are cautious, but they’re still building, which is what I’m seeing. Right now I see cautiousness, but I see, you saw this in the residential permitting, there’s cautiousness, but it’s not stalling out. So that’s a very different message than we’re cautious to the point where we’re stopped. We’re just waiting. I don’t see that. But it is tempering growth, which is really important. So I bring all of that back and I talk about the conversations I have, the data from these states and put together a picture of, how does this matter for our policy? Which is not only got to cover the whole nation, but also works with a lag.

So we have to look ahead, and that’s why the conversations we have in all the different states, as well as counting the cranes as a future looking variable, is so important. So I just want to thank everybody who’s ever answered the beige book, who’s ever met with us. If you like the beige book, we’ll send you another one. It used to be beige, by the way. It was published with a little beige cover, and that’s why they call it the beige book. I thought it should have been called something different, the Blue Book, but whatever. I couldn’t get that changed when I started as a young economist at the Fed. But the important thing is whether you’ve done a beige book, gone on an outreach event with us, if you’ve come to one of these events or you’ve done anything on our boards or councils, I just want to thank you for your service because your remarks, anything you’ve ever said to me on that front, actually influences how we think about policy.

Katie Berry:

Well, you thought quiz time was over, but alas, you’ve got two economists here. So I’d love a show of hands of who in the last several years in this room has said some version of, “We just can’t get people to work,” Or, “Nobody wants to work anymore.” None of you? I know some of you have said that. I’ve heard some of you say that. Okay. Well, I know that things are stabilizing in Anchorage’s labor force. We’re seeing not quite so much tight labor force conditions, but I really didn’t want to miss this opportunity because of your economic research to ask about the labor force. So setting aside the pandemic, setting aside the influence of that aftermath, is there a persistent change in the labor force nationally that businesses should be attuned to or thinking of?

Mary C. Daly:

So one thing that I’ve studied, and I actually have a current piece of research on this that is a worrisome component of our economy, in my judgment, is that our labor force participation rates for the domestic population, men and women, but particularly men between the ages of 25 and 54, has just been trending down. And that is worrisome because our competitor nations, the ones we do business with, but also compete with, are all staying stable or rising. So it’s a gap. And remember that our growth in our economy has two components, labor force growth and productivity, and we’re not currently making up with productivity gains, the loss of labor force growth. So I think it’s something that goes back to what kinds of jobs do you have available? What kinds of skills do people need? How much opportunity do they see forward? So people have said for generations, by the way. You can go back, I like to read old newspapers. If you go back and read old newspapers, in the 1930s, they said people don’t want to work anymore.

I mean, it’s just a constant thing. The generation before always says the next generation doesn’t want to work, but there is this decline. And it’s true. Just as a fact, you know. If you thought you weren’t going to become your parents, it all happens to us all, right? We’ve become our parents. But truthfully, I think the important thing is to recognize that the path we’re on where more and more young men, more and more young women might feel squeezed, and then you have to look for what might be squeezing them. So one thing is job opportunities, another thing is schooling, that they don’t have the right skills to meet the demands of the economy so they feel like there’s not a place. The other piece though is childcare, which was mentioned earlier, that families, if they can’t find ways to support the children, then they’re not going to have the opportunity to double up work, work two jobs, both members of the family to be out working.

And so I think those things are all important. There is no, and from our research, no one thing that explains it all, but we are seeing that there is this, I’d say, reason for national attention to be put on this. So I don’t make any policies that would be… It’s not our lane, so to speak. The Fed has those narrow mandates, we stay to what we do, but we do play an important role. Our job, our responsibility is to set the conditions for other members, our elected officials, all of you, to do the things that support the economy and help it grow. So Congress gave us, as I said, price stability and full employment. And full employment is important because we have to balance our goals. We can’t give people lower inflation, but take their jobs because that’s not what anyone wants. Ultimately, people want prices to be stable and not rise at a rapid rate, and they want to have opportunities to participate. So those are the things that the Fed can do, and I look forward to seeing what all of you will do.

Katie Berry:

Well, president Daly, I think I’ve said this before to you, I could talk to you all day, we could…

Mary C. Daly:

Likewise.

Katie Berry:

Talk all day. However, I think Dave Karp might start singing us off the stage if we go on a little further. I don’t know if he wants to do that. But we’ve all appreciated your visit here and your time today, and we look forward to seeing you back in Anchorage again, as I know you visit frequently.

Mary C. Daly:

I’m already planning my next trip, so…

Katie Berry:

Excellent.

Mary C. Daly:

There’s so much… Alaska is pretty big. I don’t know if you all know that, but there’s a lot of trips I need to make to see the entirety of the state. And I’ll close with this, you don’t know a place until you visit it, so thank you so much.