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San Francisco Federal Reserve President Mary Daly on Thursday said that even with recent inflation indicators moving in the right direction, the central bank had still not achieved price stability and would remain data-dependent in terms of deciding whether to cut interest rates.
Daly’s remarks came at a fireside chat conducted by the Federal Reserve Banks of Dallas and Atlanta. Her comments also echoed her own messaging from a tech-focused conference organized by Fortune earlier this week on Monday.
“We’ve had some really good incoming data, but even with the incoming data on inflation being positive…we’re not there yet. We don’t have price stability right now, and we need to be very confident that we’re on a sustainable path to achieve it,” Daly said.
“On the other hand, we also have the labor market coming back into balance, and we have a dual mandate,” Daly added, referring to the Fed’s twin goals to promote maximum employment and stable prices.
Earlier this month, the June nonfarm payrolls report showed jobs growth slowing and the unemployment rate ticking up. Then, last week, the latest consumer price index report showed an unexpected fall in the headline number for June.
“We have to be fully confident that we’re going to be able to deliver on price stability as gently as we can. It’s a risk to act too soon to normalize interest rates and then have inflation stuck below or above, rather, our target, and it’s a risk to hold on too long and make the labor market falter in a way that would give people one of the two things they wanted,” Daly said.
“So what that means for interest rate cuts is that we’re data-dependent. We’ll have a lot more discussion…but when we go to the meeting in a couple of weeks, we will absolutely discuss this, and craft a path of policy that we know is our best work at trying to deliver on those two mandated goals,” Daly added.
The Fed’s monetary policy committee is scheduled to meet on July 30 and 31 for its next rate decision. The central bank is widely expected to keep rates steady, with the first 25 basis point cut anticipated to be delivered in September.
