Fed Should Be Wary of Waiting Too Long to Cut Rates Says Fed's Daly (Exclusive)

Federal Reserve Bank of San Francisco President Mary Daly said she still thinks it’s reasonable for policymakers to plan on two interest-rate cuts this year, emphasizing that the central bank should not wait too long before moving.

Daly said businesses are so far tolerating President Donald Trump’s tariffs and consumers are still spending, which has allowed the Fed to maintain rates while inflation moves toward their 2% target.

“At the same time, you can’t wait forever, because if we wait til inflation is 2%, well then we’ve lost, we’ve likely injured the economy in some way that was completely unnecessary,” Daly said Thursday in an interview with Michael McKee on Bloomberg TV at the Rocky Mountain Economic Summit in Victor, Idaho.

Daly said the most recent set of rate projections from Fed officials, issued in June, offered a “reasonable outlook” in pointing to two rate cuts by year’s end. The San Francisco Fed chief also acknowledged signs that tariffs were pushing up goods prices, though she said she was encouraged by ongoing disinflation in services costs.

Several Fed officials this week have signaled they aren’t yet ready to begin cutting rates at the when they gather next at the end of July. Earlier Thursday, Fed Governor Adriana Kugler said the central bank should keep holding rates steady “for some time,” citing accelerating inflation as tariffs start to boost prices.

Speaking Wednesday evening, New York Fed President John Williams said a restrictive stance is “entirely appropriate” as officials await bigger tariff-induced price increases in the months ahead.

Projections published after the Fed’s last policy meeting in June showed policymakers were split on the outlook for rates this year amid differing views on inflation, with 10 of 19 expecting at least two quarter-point cuts and seven seeing none in 2025.

Investors currently see the odds of a rate cut in September as a little better than 50-50, according to futures.

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