Fed’s Daly Says December Aside, Rates Should Continue Falling

(Bloomberg) -- Federal Reserve Bank of San Francisco President Mary Daly said an interest-rate cut this month isn’t certain but remains on the table for policymakers.

“In order to keep the economy in a good place we have to continue to recalibrate policy,” Daly said Tuesday in an interview on Fox Business. “Whether it’ll be in December or some time later, that’s a question we’ll have a chance to debate and discuss in our next meeting, but the point is we have to keep policy moving down to accommodate the economy.”

Daly’s comments put her roughly in line with several other policymakers who’ve spoken this week and made clear they expect the US central bank to continue cutting interest rates over the next year, but stopped short of saying they are committed to making the next reduction later this month.

Also speaking Tuesday, Chicago Fed President Austan Goolsbee said he expects interest rates will “come down a fair amount from where they are now” over the next year.

Fed Governor Adriana Kugler said the economy remained in a “good position” and inflation was on a “sustainable path” toward the central bank’s 2% goal.

Neither provided a clear signal on whether they favored lowering rates later this month.

Of Fed speakers this week, only Governor Christopher Waller indicated he was leaning toward supporting a rate cut in December. But he added in his remarks on Monday that his decision would depend on additional data arriving before the meeting.

Fed officials have lowered rates by three quarters of a percentage point over two meetings since September. They gather again Dec. 17-18. Several policymakers have signaled support for continued rate cuts, but at a more gradual pace.

Daly said supply and demand are now roughly in balance, progress on inflation is continuing and policymakers are committed to bringing it down to target.

“It is moving down gradually, and that’s important for families and businesses that need some relief, but there’s more work to do,” she said. “This is the important part: Even if we do do another rate cut, policy will remain restrictive.”

Daly said she thinks the neutral rate — the level at which rates neither stimulate nor hold back economic growth — has likely edged up “closer to 3%.” Given the degree of uncertainty, though, she said the Fed should move slowly.

“I think we can take our time and adjust as the economy gives us more information,” the San Francisco Fed chief said.