Fed’s Daly Says Jumbo Rate Cut Next Month Doesn’t Seem Warranted

San Francisco Federal Reserve President Mary Daly expressed skepticism about the need for a large, 50-basis-point interest rate cut at the Fed’s September meeting. She cautioned that such a move could convey a false sense of urgency, asserting that the labor market does not currently warrant such a drastic adjustment.

While Daly agreed with last month’s decision to hold interest rates steady, she indicated she remains open to a smaller reduction in light of softened inflation pressures and weak job-market indicators. She suggested that monetary policy may now be too restrictive given the economy’s trajectory and advocated for a gradual shift toward a more neutral stance over the coming year.

Daly also reaffirmed her June outlook calling for two rate cuts this year. She left open the possibility of three cuts—should labor markets deteriorate further—but indicated fewer may be necessary if inflation reaccelerates. Additionally, she downplayed the inflationary impact of tariffs, noting businesses are absorbing much of the added cost rather than passing it on to consumers.