Forex – San Francisco Fed President Mary Daly said the Fed needs to cut interest rates to keep the labor market healthy, but how much will depend on incoming economic data.
“As inflation falls, we have a rising real interest rate in a slowing economy; that’s a basic recipe for too much tightening,” Daly told Reuters in an interview.
“We have to be very careful that if policy is too tight, there could be an additional slowdown in the labor market, and I don’t think that would be welcome,” Daly said.
Daly and his colleagues, who have said the labor market has softened but remains healthy, are expected to cut interest rates at their policy meeting on September 17-18.
According to Daly, who also evaluated the JOLTS report, the report shows that the labor market is stable but not weak. “It’s really hard to find evidence that the balance is off,” Daly said, adding that prices are rising faster than inflation and workers are still finding jobs.
Daly, who said the Fed is saving its “aggressive” moves for times when the outlook is certain, said the current outlook is less certain and added that when he spoke to people in the communities he visited, they still named inflation as their number one concern. “We don’t have price stability,” Daly said. “With inflation still running above the Fed’s 2% target, we need to continue to put downward pressure on inflation.”
https://www.reuters.com/markets/rates-bonds/feds-daly-says-rate-cuts-needed-keep-labor-market-healthy-2024-09-05/
