Federal Reserve Bank of San Francisco President Mary Daly recently discussed the progress made by the Federal Reserve in tamping down inflation and keeping the US labor market stable. Despite these achievements, Daly emphasized that there is still work to be done. She also commented on the current rate cut spread, indicating that the Fed is likely to only implement one or two more rate cuts in the remainder of 2024.
Daly mentioned that if the current forecasts are met, we can expect to see one or two more rate cuts this year. She pointed out that discussions regarding gradual rate cuts may not be as significant as they seem and expressed confidence in the Fed’s ability to wind down the balance sheet without causing disruptions in the market. Additionally, Daly highlighted that inflection points, such as the current one, are likely to result in more dissenting opinions among Fed officials.
Despite the lack of dissent among Fed officials, Daly cautioned that it does not necessarily mean that everyone agrees on the best course of action. She mentioned signs of a revival in the housing market and stressed that she is prepared for potentially messy economic data. Daly suggested that the 3% rate may be close to a neutral level and that the funds rate still has a long way to go before settling.
Daly also noted that inflation has been receding across various sectors and the Fed has effectively managed to reduce inflation without causing major disruptions in the market. She expressed cautious optimism about the economic outlook and emphasized that a continued expansion is still very possible. Daly highlighted that the labor market has largely normalized post-pandemic and the economy has improved significantly, with inflation easing considerably.
Furthermore, Daly emphasized the importance of the Fed’s goals to deliver 2% inflation while maintaining full employment in the job market. She highlighted the need for continued progress towards these goals and emphasized the importance of remaining vigilant. Daly mentioned that the risks to the Fed’s job and inflation mandates are now more balanced, indicating the need for ongoing monitoring and adjustments in monetary policy.
