Fed's Daly says patience is needed to finish the job on inflation

By Greg Robb

Three rate cuts in 2024 is a 'reasonable baseline,' San Francisco Fed President Mary Daly says

The Federal Reserve should take its time before cutting interest rates, given the risks that some of the factors that have been pushing down inflation might peter out or even reverse, San Francisco Fed President Mary Daly said on Friday.

"We will need to resist the temptation to act quickly when patience is needed, and be prepared to respond agilely as the economy evolves," Daly said in a speech at the National Association for Business Economics conference in Washington, D.C.

She said an expectation of three rate cuts was a "reasonable baseline" for the outlook for monetary policy this year.

Stocks DJIA SPX were lower on Friday and the yield on the 10-year Treasury note BX:TMUBMUSD10Yrose to 4.29% following a stronger-than-expected producer-price index report.

Daly said the bumpy economic data this week was normal for turning points in the economy.

Daly said she didn't agree with the notion that the "last mile" of inflation would harder.

"I don't buy into this idea. That suggests that we have to grind out the last two-tenths of a percentage point on inflation just laboriously, and I don't see evidence of that," Daly said.

Daly said that the economy is better, with inflation falling without the economy breaking.

"But progress is not victory and we, the FOMC, need to deliver more than a few fleeting moments of relief," she said.

There is more work to do to bring sustainable price stability.

Daly said that progress on inflation might slow if the work force doesn't continue to grow and productivity rise.

Another risk is that the labor market could falter, Daly said, but quickly added that the Fed doesn't see that right now.

-Greg Robb

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02-16-24 1354ET

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