On Wednesday, Mary Daly, the San Francisco Federal Reserve Bank President, said she “fully” supported the U.S. central bank’s half-of-a-percentage-point interest-rate cut last month, and said one or two more rate cuts this year are likely if the economy evolves as she expects.
“The labor market has downshifted,” Daly said in an interview with KTVB anchor Carolyn Holly at Boise State University, adding she is now “quite confident” inflation is headed toward the Fed’s 2% goal.
With no change to the Fed policy rate, which the central bank had kept in the 5.25%-5.50% range since July 2023, the real rate of interest was rising, Daly said, “and that was ultimately a recipe, in my judgment, for breaking the economy…and not gaining anything new on the inflation trajectory.”
And, she said, “I do not want to see further slowing in the labor market.”
Last month’s half-point cut was, therefore, a way “to get the policy in line with the economy,” she said. “It doesn’t predict what we’ll do at the next meeting. It doesn’t tell you anything about the pace or magnitude of further adjustments.”
Fed policymaker projections published last month suggest most see one or two quarter-point rate cuts at the remaining two Fed meetings this year, and Daly said Wednesday she agreed.
“Two more cuts this year, or one more cut this year, really spans the range of what is likely in my mind, given my projection for the economy,” she said.
Fed policymakers have expressed a range of views about the degree of their enthusiasm for their September move, ranging from whole-hearted support to an acknowledgment that it “made sense” to, in the case of Fed Governor Michelle Bowman, outright dissent.
Minutes of the meeting released earlier Wednesday showed what did have across-the-board agreement was concern that the move “not be interpreted as evidence of a less favorable economic outlook.”
Daly said she views the labor market, with an unemployment rate of 4.1%, as currently at full employment.
(Source: ReutersReuters)
