San Francisco Federal Reserve President Mary Daly: Will not rush to cut interest rates before inflation approaches the 2% target

According to the Zhitong Finance APP, on Tuesday, Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that she is not in a hurry to push for interest rate cuts until inflation approaches the Federal Reserve's target of 2%. She pointed out that the current robust economic conditions in the U.S. allow the Federal Reserve to maintain its current policy stance calmly until the trend of declining inflation becomes clearer. "The state of the U.S. economy is very good at the beginning of 2025," Daly said at an event hosted by the World Affairs Council in California. "Economic growth is solid, the labor market is stable, and although inflation is gradually decreasing, we are moving towards the 2% target." Daly has served as President of the San Francisco Fed since 2018 and will be a voting member of the Federal Open Market Committee (FOMC) in 2024, but will rotate out of the voting seat in 2025. The San Francisco Fed's next voting rights will come in 2027. In the last three meetings of 2024, the Federal Reserve cut interest rates by a cumulative 1 percentage point and maintained the federal funds rate target range at 4.25%-4.5% during the January 2025 meeting. Daly believes that the current economic momentum is still ongoing, and the Federal Reserve can allow the still-constraining high interest rates to continue to work to further reduce inflation while closely monitoring changes in government policy. "I have always reminded everyone that the world is full of uncertainties," Daly stated. "During my tenure at the Federal Reserve, I experienced the financial crisis and the COVID-19 pandemic, times of extremely high uncertainty. But uncertainty does not mean we must stand still; it means we need to respond to all information more cautiously and thoughtfully. Therefore, in 2025, my position as a monetary policy decision-maker is that we can take our time." One of the main uncertainties in 2025 is the decision-making of the administration of U.S. President Donald Trump. For example, from last weekend to this Monday, the trade tariff policies between the U.S., Mexico, and Canada fluctuated. Daly noted that although tariff policies may be driven by non-economic purposes, these issues are generally not within the main assessment scope of the Federal Reserve, but she currently does not believe that tariffs pose a significant risk to U.S. economic growth. However, she will closely monitor the impact of current and potential tariff policies on inflation. "From the perspective of economic damage, these tariffs are not particularly severe, although they will have some impact," Daly said. "Although I do not like tariff policies, I cannot exaggerate their negative effects." In addition to tariff policies, immigration policies are another factor that may impact the economy, especially when the U.S. labor market faces substantial shocks. Furthermore, the potential impacts of policies such as tax cuts and deregulation are also worth noting. Daly stated that the ultimate impact of these policies on the economy will depend on their scope, intensity, and timing of implementation. "As policymakers, we must consider the net impact of all factors comprehensively, but it is currently impossible to draw conclusions," Daly emphasized. "Taking action too early... may lead to policy missteps." The Federal Reserve's next meeting is scheduled for March 18-19, during which officials will have two months of inflation and employment data to reference. According to market pricing, investors expect an approximately 85% probability that the Federal Reserve will keep interest rates unchanged at this meeting Market expectations and the median forecast of the FOMC both indicate that the Federal Reserve's rate cut this year may be around 0.5 percentage points. Daly stated that the Federal Reserve is currently in a good position to observe and is not in a hurry to make adjustments. "We will successfully bring down inflation... If this takes longer, we will continue to work hard."