Fed’s Daly leaves door open for more rate cut on continued labor market weakness by Investing.com

Investing.com — San Francisco Fed President Mary Daly on Monday strengthened expectations for a rate cut next month and suggested that a bigger rate cut remains on the monetary policy table if the labor market keep losing weight.

“It’s hard to imagine anything that could derail the September rate cut,” Daly said in an interview with Bloomberg on Monday.

The comments followed Fed Chairman Jerome Powell’s message last week in Jackson Hole, Wyo., when he said “the time has come to adjust policy,” giving a clear signal that interest rate cuts are coming.

While a 25-basis-point rate cut in September is expected as the most likely outcome, according to Investing.com, Daly suggested that a further weakening of the labor market could force a bigger cut.

“If the labor market weakens more than anticipated, we should be more aggressive,” she said.

Daly’s remarks characterized a shift in focus at the Fed to weakness in the labor market compared to a few weeks ago, when she said in a speech on Aug. 18 that the labor force was slowing but “wasn’t weak.”

The upcoming jobs report on September 6 is expected to gain further attention as it comes ahead of the Federal Open Market Committee meeting on September 17-18.