By Michael S. Derby
NEW YORK (Reuters) -Federal Reserve Bank of San Francisco President Mary Daly said on Thursday the time to cut rates is nearing, without saying when she believes that should happen.
“I really am of the view that it’s time” to weigh the need to cut interest rates to ensure the economy stays in the good place where it currently resides, Daly said at an event held by Market News International. “I see two cuts … as a likely outcome,” while noting there is still a lot of uncertainty around that outlook, Daly said.
Daly noted in the appearance that she was eyeing a possible easing in the fall, which puts her in the same space as many Fed officials, even though some have said the case for a July rate cut is there. Fed Governor Christopher Waller reiterated Thursday his interest in cutting rates at the end of the month, while acknowledging his view put him in the “minority” of policy makers.
In her appearance, Daly said “the economy is in a good place.” She added, “you can look at growth, it’s solid. You can look at the labor market, it’s solid. And then you look at inflation, it’s coming back to our 2% target” although it isn’t all the way to where it needs to be, Daly said.
Daly also said that tariff increases that have driven much of this year’s economic anxiety may not have the negative impact on inflation many have feared, with firms learning how to deal with President Donald Trump’s import tax increases without fully passing them along. When it comes to tariffs and higher inflation, “it’s possible it just doesn’t materialize.”
Daly also said the Fed has to be careful and not hold policy steady indefinitely while waiting for inflation to arrive.
“One of the ways you can make a policy mistake is to wait for something to materialize that doesn’t,” Daly said. “It’s useful now to sort of recognize that waiting for inflation to rise or become persistent could leave us behind in terms of adjusting the policy rate. And I don’t want to be doing that,” she said.
(Reporting by Michael S. Derby; Editing by Chris Reese and Chizu Nomiyama )
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