(Reuters) – San Francisco Federal Reserve Bank President Mary Daly on Friday said she believes the U.S. economy and monetary policy both are in a “good place,” and the risks have grown more balanced while there is still work to do to bring down inflation, .
“We have to calibrate very carefully to ensure that we continue to bring inflation down and we ensure that we do it gently, as gently as we possibly can” Daly said at the San Diego County Economic Roundtable. “We know that policy is in a good place, the economy is in a good place, and we can start to be more patient to see what we need, as a Fed, to do next…It takes patience. It takes gradualism.”
The words calibration, patience and gradualism suggested Daly believes Fed rate cuts will arrive but are not imminent.
Unlike last year, when the focus was on fighting inflation, Daly said this year there is more need for attention to the Fed’s other mandate, of achieving maximum employment.
“The risks to the economy are balanced, and the risks to both sides of our mandate are balanced,” she said.
Early Friday Daly said it would be “premature” to think interest-rate cuts are around the corner. Inflation has come down from its 2022 peak but is still too high, she said, noting the December reading on core consumer price inflation, of 3.9%.
“There is a lot of work to do. There is no denying it,” she said.
The Fed targets 2% inflation, though by a different yardstick than Daly cited. By that measure, the personal expenditures price index, year-over-year inflation measured 2.6% in November, the latest reading available.
Other policymakers speaking recently, notably Fed Governor Christopher Waller this week, have sounded more optimistic on inflation’s trajectory.
Daly is likely the last Fed policymaker to speak publicly ahead of the Fed’s Jan 30-31 policy meeting, due to an agreed-upon quiet period running up to each meeting.
(Reporting by Ann Saphir; editing by Jonathan Oatis and David Gregorio)