Federal Reserve Bank of San Francisco President Mary Daly said internal policy divisions are less significant than the FOMC's decision to hold rates steady.
This stance comes as markets seek clarity on the trajectory of U.S. monetary policy and whether the central bank has reached the end of its cycle of lowering interest rates.
Speaking Monday, May 5, at an event in San Francisco, Daly addressed the current state of the economy. She said, "U.S. monetary policy is in a 'good place' as we monitor inflation and labor market conditions" [1].
Regarding the future of interest rates, Daly said it is too early to determine if the central bank is at the end of its rate-cutting cycle [2]. She said the collective decision of the Federal Open Market Committee to maintain current rates outweighs the internal disagreements reflected in policy statements [2].
However, Daly said a softening job market and a lack of persistent inflation driven by tariffs could signal that the time for further cuts is approaching. She said, "Given mounting evidence that the U.S. job market is softening and no signs of persistent tariff-driven inflation, time is nearing for rate cuts, though we may need more than two" [3].
Throughout this process, Daly said she continues to monitor inflation expectations from both producers and consumers. The focus remains on balancing labor-market conditions, and the goal of maintaining price stability across the U.S. economy.
“"U.S. monetary policy is in a 'good place' as we monitor inflation and labor market conditions."”
Daly's comments suggest a cautious but open-minded approach to future rate cuts. By prioritizing the FOMC's actual actions over the rhetoric in policy statements, she is signaling that the Fed is remaining flexible. The mention of potentially needing more than two additional cuts indicates that the Fed may be more concerned about a softening labor market than previously signaled, provided that inflation remains under control.
