Federal Reserve Bank of San Francisco President Mary C. Daly emphasized Thursday that maintaining a modestly to moderately restrictive monetary policy remains essential for bringing inflation back down toward target levels.
Speaking in a late-evening appearance, Daly said, “We still need a restrictive stance to ensure inflation continues its downward path.” While noting that two interest rate cuts could be appropriate later this year—provided the labor market holds firm and inflation continues to ease—she cautioned that a wide range of risks still clouds the outlook.
“At present, the focus is squarely on inflation,” Daly said, adding that she is closely watching for signs that inflation is either receding, stabilizing, or showing signs of renewed pressure. On the labor front, she reported no significant signs of weakening, reinforcing the Fed‘s current stance.
Daly also noted that the Federal Reserve is not currently facing difficult policy tradeoffs. “The Fed remains agile, and our policy is well-positioned,” she said, highlighting that even holding rates steady represents a deliberate and active decision.
Commenting on the business climate, Daly observed that while firms are navigating uncertainty cautiously, they are not completely stalled—just taking fewer risks.
Market Reaction:
The U.S. Dollar Index (DXY) edged lower following Daly’s remarks, down 0.11% on the day to 99.25 at the time of writing.
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