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Fed’s Daly sees one or two more interest rate cuts this year

With no change to the Fed policy rate, which the central bank had kept in the 5.25%-5.50% range since July 2023, the real rate of interest was rising, Daly said, “and that was ultimately a recipe, in my judgment, for breaking the economy…and not gaining anything new on the inflation trajectory.”

And, she said, “I do not want to see further slowing in the labor market.”

Last month’s half-point cut was therefore a way “to get policy in line with economy,” she said. “It doesn’t predict what we’ll do at the next meeting. It doesn’t tell you anything about the pace or magnitude of further adjustments.” 

Fed policymaker projections published last month suggest most see one or two quarter-point rate cuts at the remaining two Fed meetings this year, and Daly said Wednesday she agreed.

“Two more cuts this year, or one more cut this year, really spans the range of what is likely in my mind, given my projection for the economy,” she said.

Fed policymakers have expressed a range of views about the degree of their enthusiasm for their September move, ranging from whole-hearted support to an acknowledgement that it “made sense” to, in the case of Fed Governor Michelle Bowman, outright dissent.

Minutes of meeting released earlier Wednesday showed what did have across-the-board agreement was concern that the move “not be interpreted as evidence of a less favorable economic outlook.”

Daly said she views the labor market, with an unemployment rate of 4.1%, as currently at full employment.


Source: Economy - investing.com

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