In order to deal with inflation, the Fed will 'absolutely' hike interest rates in September: SF Fed Prez: Mary Daly

Federal Reserve Bank of San Francisco President Mary Daly on Sunday said the U.S. central bank will absolutely raise interest rates half a percent in September to try to bring down red-hot inflation.

Daly appeared on CBS’ "Face the Nation," saying Americans are struggling as inflation hits 9.1% – the highest since 1981 – while wage growth is not rising at as fast a rate. "

"Americans are losing ground every day, so the focus has to be on bringing inflation down," Daly said. The potential rate hike comes as the U.S. economy is teetering on the brink of a recession. 

The Commerce Department reported last week that the GDP shrank by 0.9% in the second quarter after tumbling 1.9% over the year’s first three months.

However, Daly said that she doesn’t see that inflation is embedded in the economy, which she says has shown signs of cooling.

However, Daly said that she doesn’t see that inflation is embedded in the economy, which she says has shown signs of cooling.

"What I see is supply and demand are just unbalanced. About 50%, by my own staff’s estimates, of the excess inflation we see is related to demand, the other 50% to supply," she said.

Daly said that she believes the Fed is in a great position to bring demand down, and that they already see signs of cooling forming in the housing market and in investments.

It will take some time for the interest rate changes we've to impact, but I do see indicators that the economy is cooling, she said. That is our promise to the people, and we are far from finished.

It will take some time for the interest rate changes we've to impact, but I do see indicators that the economy is cooling, she said. That is our promise to the people, and we are far from finished.