Fed's Daly Says Strong Job Market Won't Halt Rate Cuts
- Mary C. Daly, president of the Federal Reserve Bank of San Francisco, emphasized that the central bank should not act out of fear regarding interest rate cuts.
- Despite stronger labor data, she believes that the Fed should continue to lower interest rates if inflation remains under control.
- Daly advocates for maintaining job growth and economic expansion, drawing on past experiences where a strong job market did not lead to rapid inflation.
On October 15, 2024, Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, addressed the implications of a strong job market on interest rate policies. During an interview, she expressed her belief that the Federal Reserve should not hesitate to implement rate cuts simply due to concerns about a robust labor market. Instead, she argued that the central bank should focus on inflation trends when making such decisions. Daly pointed out that recent labor data has shown strength, raising questions about the future of interest rates. However, she maintained that as long as inflation continues to slow, the Fed should proceed with its plans for two more quarter-point rate cuts before the end of 2024. This perspective reflects a broader strategy of not stifling economic growth unnecessarily. Drawing on historical context, Daly referenced the year 2019, when the job market was strong without leading to rapid inflation. She noted that low unemployment during that time facilitated wage gains and encouraged more individuals to enter the labor force. This experience serves as a foundation for her current stance on maintaining job growth while managing inflation effectively. In conclusion, Daly's comments suggest a cautious yet optimistic approach to monetary policy, advocating for continued economic expansion without the fear of inflationary pressures. Her insights highlight the importance of balancing job growth with inflation control in the Federal Reserve's decision-making process.