Fed's Daly: Labor market not weak, time to "cautiously" adjust interest rates
San Francisco Fed President Daly stated that recent economic data has strengthened her confidence in inflation control, and mentioned that it is time to cautiously adjust interest rates in the range of 5.25-5.5%. She emphasized that the labor market is not weak, called for a gradual rate cut, and warned about the importance of preventing a sluggish job market. Furthermore, she believes that overly tightening monetary policy may result in price stability but an unstable labor market. Daly's remarks are in line with Atlanta Fed President Bostic's views, reminding to handle the ongoing economic slowdown with caution
According to the financial news app Zhitong Finance, Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that recent economic data has given her "more confidence" that inflation is under control. She mentioned that it is time to consider adjusting interest rates from the current range of 5.25-5.5%. She called for a "cautious" approach to gradually lowering interest rates.
Mary Daly, a voting member of the FOMC this year, stated, "Gradualism is not weak, not slow, not lagging, just cautious," and added that although the labor market is slowing down, it is "not weak."
In her earlier remarks this month, she indicated that it is still too early to determine whether the July employment report signals an economic slowdown or true weakness, but she warned that preventing the labor market from deteriorating is "extremely important." She expressed "more confidence" that inflation is moving towards the 2% target.
Daly mentioned that the Federal Reserve does not want to "overly tighten monetary policy during an economic slowdown." She added that failing to adjust policy in response to progress in inflation and slowing economic growth "would lead to outcomes we don't want, namely price stability but an unstable, teetering labor market."
Her comments align with the views of Raphael Bostic, President of the Federal Reserve Bank of Atlanta. Bostic recently stated that waiting too long to cut interest rates "does indeed carry risks." The weak July employment report raised concerns about the health of the U.S. economy and to some extent triggered a global stock market sell-off.
Daly mentioned that companies generally do not resort to layoffs. Instead, they are now cutting discretionary spending to adapt to a world that is no longer a "reckless growth" "bubble world."
Federal Reserve Chairman Jerome Powell is scheduled to speak on the economic outlook on Friday, the first day of the annual economic symposium held in Jackson Hole