Fed’s Daly sees greenshoots yet rate cuts await clearer signals

San Francisco Fed President Mary Daly highlighted the shift towards a more data-dependent approach, a move away from extensive forward guidance. She underscored the importance of being “methodical” in decision-making, emphasizing Fed’s intention to “hold on just right” without being locked into predefined commitments.

In a Bloomberg TV interview overnight, Daly articulated the need for “a collage of evidence” to confirm a sustainable downward trend in inflation, relying not just on published economic statistics but also on insights from business contacts. Although she acknowledged the emergence of positive signs, or “green shoots,” in the economy, she cautioned, “we’re not there yet,” indicating that more evidence is needed to confirm that inflation is on a consistent decline.

Furthermore, Daly discussed the implications of adjusting the nominal interest rate as inflation begins to ease. She argued for the necessity of reducing interest rates in a timely manner to prevent overly tightening monetary policy that could inadvertently trigger an economic downturn.