Mary Daly of the Federal Reserve advocates gradual interest rate cuts and points to inflation confidence: “We are on the way to price stability”

Mary DalyPresident of the Federal Reserve of San Francisco, in a recent interview, advocated a cautious approach to rate cuts against the backdrop of growing confidence in inflation control.

What happened: Daly, a voting member of the Federal Open Market Committee, has suggested that the U.S. economy is not yet in a position to justify rapid rate cuts, stressing the need for a gradual adjustment in borrowing costs, the Financial Times reported on Sunday.

She said it was time to consider adjusting borrowing costs from the current 5.25% to 5.5%, the report said.

Their comments come ahead of the annual meeting in Jackson Hole, Wyoming, where central bankers from around the world gather to discuss the future of monetary policy.

Despite concerns about a potential economic slowdown, Daly stressed that the U.S. economy is not in dire straits and advocated a “prudent” approach to rate cuts. She explained: “The gradual approach is not weak, it is not slow, it is not lagging, it is just prudent.”

Daly’s stance addresses concerns about a possible recession in the U.S. economy and the speed at which U.S. interest rates will decline from their 23-year highs.

The president of the San Francisco Fed downplayed the urgency of a drastic response to signs of weakening labor market developments and stressed that the U.S. economy shows no significant signs that it is heading for a deep downturn.

“After the first quarter of this year, inflation is slowly approaching the 2% mark,” Daly said. “We are not there yet, but that gives me more confidence that we are on the path to price stability.”

Investors are expecting a rate cut at the next Fed meeting. The markets are calculating a 70 percent probability of a quarter-percentage point cut. This would be the first rate cut in four years.

See also: Oil prices fall as Gaza ceasefire talks progress, China releases weak economic data

Why it is important: The Federal Reserve’s approach to interest rate cuts has been the subject of heated debate in recent weeks, with conflicting economic data leading to wild swings in interest rate expectations.

At the beginning of August, a 50 basis point rate cut in September seemed likely, but these expectations have since shifted: markets now price in a more moderate cut of 25 basis points as more likely.

economist Claudia SahmCreator of the Sahm Rule, was also at the center of the debate and defended the relevance of the rule despite growing criticism and skepticism, including from the chairman of the US Federal Reserve. Jerome Powell.

Renowned economist Peter Schiff has also spoken out, calling the July Consumer Price Index a “fraud” and questioning the accuracy of the CPI.

Released consumer inflation data for July suggests that the Federal Reserve may not cut interest rates as much as expected in September, as markets have become more concerned about economic growth than inflation.

Read more:

Image generated with AI via Midjourney

This story was created with Benzinga Neuro and edited by Kaustubh Bagalkote