Fed’s Daly Says More Cuts Likely Needed, Though Timeline Unclear

(Bloomberg) — Federal Reserve Bank of San Francisco President Mary Daly said interest rates remain modestly restrictive after last month’s quarter-point cut, and that policymakers will watch for increasing weakness in the labor market.

“I think a little more will be be needed over time to get that interest rate where it’s balancing out those two risks,” she said Thursday at the reserve bank’s Western Bankers Forum in Utah, referring to threats to employment and inflation. “When that is going to happen is really going to be a reflection of the incoming information both on inflation and on the labor market.”

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Fed officials lowered interest rates by a quarter percentage point — the first cut since December — at their policy meeting last week, citing the need to support a more fragile job market.

Hiring has slowed significantly over the past few months and the unemployment rate climbed to 4.3% in August, the highest since 2021.

“We’ll have to continue to make that assessment in the coming meetings, not just the meetings that come before the end of the year, but the next several meetings,” Daly said.

The San Francisco Fed chief, who doesn’t vote on monetary policy this year but participates in Federal Open Market Committee deliberations, reiterated points of a speech she gave Wednesday focused on the need to be steady and careful in making decisions in uncertain times.

“We are in the hard part of central banking right now, there is no risk-free path,” she said, echoing comments made by Fed Chair Jerome Powell in recent days.

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