Fed's Daly: To prevent excessive tightening, rate cuts may be needed next year

Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that it may be appropriate to lower benchmark interest rates next year due to the improvement in inflation this year. The Fed's goal is to bring the inflation rate down to 2%, but they hope to do so in a gradual manner. She has a similar expectation for considering rate cuts starting in 2024 and expects the Fed to lower rates by 75 basis points next year, bringing the inflation rate to around 2.4%. She believes it is too early to speculate on when the rate cuts will happen and is more focused on the developments in 2023. Daly believes that maintaining stable rates will reduce the possibility of excessive tightening, but still believes that a 75 basis point reduction in benchmark rates would be sufficient to provide restraint.