The time for rate adjustment is near

San Francisco Federal Reserve Bank (Fed) Mary Daly made headlines on Monday, warning that despite clear signs of the need for rate adjustments, markets should not go too far, too fast, with expectations about size and frequency.

Key highlights

It is time to adjust our policy. It’s hard to imagine that anything could derail the Sept. rate cut.

I don’t want to keep tightening policy as inflation falls.

The labor market is completely in equilibrium.

I hear no signs that companies are ready for layoffs.

I see no signs of a sudden weakening of the labor market.

I don’t see any warning signs of weakness, but I want to be sure to adjust the policy as we go.

It’s too early to know how big the rate cuts will be.

The most likely outcome is that we will continue to achieve a gradual slowdown in inflation and a sustainable pace of labor market growth.

It is reasonable to adjust policy to the normal cadence if the economy develops as expected.

If the economy weakens more than anticipated, we should be more aggressive.

It is reasonable to adjust policy to the normal cadence if the economy develops as expected.

If the economy weakens more than anticipated, we should be more aggressive.

I don’t want to see the labor market weaken further.

We want the job market to stay where it is. We need to adjust the policy rate to keep it there.

I don’t want to declare that we are on the neutral path.

We could see the real neutral rate as low as 1%.

We have a long way to go and even after the rate cut we will be restrictive.

I expect growth to be at or slightly below trend.

We are far from declaring victory, but we will bring inflation to the target.