Janice R. Andrews
Introduction:
Mary Daly, President of the San Francisco Federal Reserve Bank, expressed a careful perspective on the current inflation situation, underscoring the considerable work required to bring it back to the Federal Reserve’s 2% target. Speaking with Fox Business Network, Daly emphasized that considering interest-rate cuts is premature and stressed the importance of gathering more evidence before making any adjustments to monetary policy.
Body:
Daly’s Worries and Dedication to Price Stability:
Daly reaffirmed the Federal Reserve’s commitment to achieving price stability while approaching the process with caution. Despite recognizing the importance of forward-looking policies, she cautioned against prematurely declaring victory over inflation. Daly asserted that the central bank has not yet achieved its goal, and it is too early to contemplate imminent policy adjustments.
Policy Meeting Approaching:
With the upcoming policy meeting just around the corner, market expectations have been uncertain. While it is widely expected that the policy rate will remain in the current range of 5.25%-5.5%, there has been growing confidence in potential rate cuts, fueled by the unexpectedly rapid decline in inflation during the second half of the previous year.
Daly Challenges Expectations of Rate Cuts:
Daly’s recent comments have challenged these expectations, countering the prevailing sentiment that rate cuts are imminent. This shift in sentiment follows better-than-expected retail sales and other indicators indicating continued strength in consumer spending. Other Federal Reserve policymakers have echoed Daly’s stance, emphasizing that rate cuts should only be considered with clear evidence of a sustained decline in inflation.
The Importance of Further Evidence:
Daly underscored the need for more evidence to support any decision to adjust the policy rate. She highlighted the necessity of consistent and sustainable evidence indicating inflation moving back toward the 2% target. Additionally, Daly mentioned that signs of weakness in the labor market could influence her consideration of rate cuts.
Conclusion:
As the Federal Reserve prepares for its policy meeting, Mary Daly’s cautious approach reflects the ongoing uncertainties surrounding inflation and potential rate adjustments. The central bank remains committed to restoring price stability but emphasizes the need for patience and substantial evidence before making significant changes to monetary policy. The financial markets will closely monitor the upcoming meeting for insights into the Federal Reserve’s stance on inflation and the possibility of future rate cuts.
