Federal Reserve to Remain Patient on Rates Amid Trade Policy Shifts

Mary Daly, the President of the Federal Reserve Bank of San Francisco, has stated that the Federal Reserve has the capacity to remain patient before making any adjustments to interest rates, allowing time to observe the impacts of changes in trade policy. Daly emphasized that the Federal Reserve had already reduced interest rates by 100 basis points last year, positioning the policy in a favorable state. This state, she noted, provides a moderate level of restraint to continue lowering inflation without overly tightening the economy and making it vulnerable.

Daly highlighted that the current economic growth is robust, and the monetary policy is well-positioned. This favorable situation allows the Federal Reserve the time and capability to proceed cautiously and thoughtfully. Her remarks underscore the Federal Reserve's commitment to a measured approach, ensuring that any policy changes are well-considered and aligned with the evolving economic landscape. Daly's statements reflect a balanced perspective, acknowledging the need for patience while maintaining the flexibility to respond to future developments.

Daly's comments come at a time when the recent imposition of new tariffs by President Donald Trump on U.S. trading partners has led analysts to revise down their economic growth forecasts for the year and increase their inflation projections. Federal Reserve Chairman Jerome Powell had previously indicated that the impact of these new tariffs could be more significant than anticipated, and the Federal Reserve must ensure that price increases do not lead to sustained inflation.

Daly's remarks suggest that the Federal Reserve is in a strong position to navigate the current economic environment. By maintaining a patient and measured approach, the Federal Reserve can continue to support economic growth while managing inflationary pressures. This strategy allows the central bank to respond effectively to any future changes in trade policy or other economic developments, ensuring stability and resilience in the economy.