San Francisco Fed President Mary Daly, in an interview with the Financial Times, acknowledged the “very, very encouraging” signs of falling inflation in this week’s data. However, she cautioned against hastily concluding the rate-raising cycle, emphasizing the importance of a cautious and informed approach.
Daly expressed concern about prematurely ending the cycle, noting the potential risks involved. “We have to be bold enough to say ‘we don’t know’ and bold enough to say ‘we need to take the time to do it right’,” she stated. She warned that a premature halt could lead to a “stop-start” scenario, which could ultimately harm the Fed’s credibility.
In her view, rate cuts are not on the immediate horizon. “Rate cuts are ‘not happening for a while’,” Daly remarked, suggesting a continued commitment to the current restrictive monetary policy direction until there is substantial evidence of a sustainable return to the 2% inflation target.