Fed's Daly: One or Two More Rate Cuts Expected This Year

In a recent interview, Federal Reserve Bank of San Francisco President Mary Daly indicated that the central bank is likely to cut interest rates one or two more times this year. This projection comes amidst a backdrop of evolving inflation data and labor market indicators, as well as global economic conditions.


Inflation has been a key factor influencing Daly's rate cut projections. After peaking at around 7% in 2022, the annual increase in the personal consumption expenditures price index (PCE) has been gradually declining. In July 2024, the PCE rose 2.5% year-over-year, nearing the Fed's 2% target. Daly has acknowledged this progress, stating that "the direction of change is down," and that "the time to adjust [interest rates] is now."


The labor market has also played a significant role in shaping Daly's expectations for interest rate adjustments. Despite a slight increase in the unemployment rate to 4.3% in July 2024, the labor market remains relatively healthy. Daly has emphasized the importance of sustaining labor market health and has expressed concern about the potential for overly tight monetary policy to slow job growth.

Global economic conditions have also influenced Daly's stance on U.S. interest rate policy. She has noted that the Fed must be mindful of the global economic environment and the potential impact of rate cuts on international investment flows and the U.S. dollar's exchange rate.

The potential impact of future economic data releases, such as the U.S. Labor Department's August monthly employment report and the Consumer Price Index (CPI) report, will likely influence Daly's projections for rate cuts this year. These data points will provide valuable insights into the labor market and inflation trends, helping the Fed make informed decisions about monetary policy.


In conclusion, Federal Reserve Bank of San Francisco President Mary Daly expects one or two more interest rate cuts this year, driven by evolving inflation data, labor market indicators, and global economic conditions. As the Fed continues to monitor economic data and assess the impact of rate cuts on the U.S. economy, investors should remain vigilant and stay informed about the central bank's policy decisions.