This is a “reasonable” expectation, but a forecast and not a promise, said the president of the San Francisco branch of the Fed on Tuesday in Nevada. The Fed is prepared to do less if inflation remains stable or to do more if the labor market stalls or inflation falls faster than expected.
But at the moment it is right not to do anything. There is a “real risk” of lowering interest rates too early and thereby entrenching inflation that is too high. Daly, along with other Fed bankers, voted in March to keep interest rates in the 5.25 to 5.5 percent range. This should lead to a further falling inflation rate. Inflation is now below its high of mid-2022, but still above the Fed’s target of two percent.
“Economy and politics in a good position”
“At this point, the economy and politics are in a good position,” said Daly. “Inflation is coming down, but only slowly, bumpily and sluggishly. The job market is still strong and growth is strong. So there’s really no urgency to adjust the interest rate.” There has been controversy among experts for months as to when the Fed will lower interest rates again for the first time and how many cuts there should be overall this year. Within the Fed committee there are votes for one, for two and also for three steps downwards.
