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Investing.com -- San Francisco Federal Reserve President Mary Daly said Thursday it is "reasonable" to expect two interest rate cuts before the end of this year, noting that the impact of President Donald Trump’s tariffs appears more muted than initially anticipated.
Speaking at the Rocky Mountain Economic Summit in Victor, Idaho, Daly acknowledged that inflation remains above the Fed’s 2% target and there’s "some work to do" to bring it down. However, she cautioned against keeping rates restrictive for too long as that could unnecessarily damage the labor market.
"I don’t think we need to slow precipitously to produce the last mile on inflation," Daly said. "I wouldn’t want to see more weakness in the labor market... I really wouldn’t want to see that, which is why you can’t wait forever" on cutting rates.
Daly noted that companies are finding ways to avoid tariffs and are not passing all increased costs to customers. Despite a doubling of the effective average tariff rate under Trump, these higher import levies have not significantly affected overall inflation.
"We haven’t seen any evidence that that’s occurring," she stated, while acknowledging recent consumer price data shows rising goods prices. She pointed to encouragingly lower inflation in non-housing-related services as an offsetting factor.
When asked about potentially reducing the current policy rate range of 4.25%-4.50% at the Fed’s meeting in two weeks, Daly indicated she expects rate cuts to resume as inflation falls, with the policy rate ultimately settling at 3% or somewhat higher.
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