Fed’s Daly sees one or two more rate cuts this year By Reuters

(Reuters) – Federal Reserve Bank of San Francisco President Mary Daly said on Wednesday she “fully supported” the U.S. central bank’s half-percentage-point interest rate cut last month and said one or two more rate cuts are on the way this year. are likely if the economy performs as expected. “The labor market has come down,” Daly said in an interview with KTVB anchor Carolyn Holly of Boise State University, adding that he is now “quite confident” that inflation is moving toward the Fed’s 2 percent target.

With no change in the Fed’s policy rate, which the central bank had kept in a range of 5.25%-5.50% from July 2023, the real interest rate rose, Daly said, “and that was in the followed a recipe, in my opinion, for breaking the economy… and because we won’t gain anything new on the trajectory of inflation.”

And, she said, “I don’t want to see a further slowdown in the labor market.”

Last month’s half-point cut was therefore a way to “align politics 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 extent of subsequent adjustments.”

Fed policymakers’ projections released last month suggested most would see cuts of one or two quarter points at the Fed’s two other meetings this year, and Daly said Wednesday he agreed.

“Two more cuts this year, or one more cut this year, really runs the gamut of what’s likely in my mind given my projection for the economy,” she said.

Fed policymakers ranged in their enthusiasm for their move in September, ranging from wholehearted support to acknowledgment that it “makes sense” as Fed Governor Michelle Bowman said total dissent.

Minutes of the meeting released earlier on Wednesday showed that there was general agreement that the move “should not be interpreted as evidence of a less favorable economic outlook”.

Daly said he sees the labor market, with an unemployment rate of 4.1 percent, as currently at full employment.