Federal Reserve's Daly: Three rate cuts this year is a reasonable baseline scenario

Federal Reserve's Daly stated that the Fed's three rate cuts this year are a "reasonable baseline" expectation. In her prepared speech, she emphasized two opposing risks that officials need to consider when making policies: on one hand, the progress of deflation is slowing down; on the other hand, there is a sudden and sharp deterioration in the labor market. Daly said that completing this task requires perseverance. We need to resist the temptation to act quickly when patience is needed and be ready to respond flexibly as the economy develops.

 

Daly believes that price stability is imminent but there is still more work to be done. She also discussed various factors that could hinder further progress in reducing inflation. She indicated that labor growth and productivity may not grow as strongly as before, while consumer demand may not slow down as expected. The sustained economic momentum exceeds existing supply and continues to pose a risk for inflation prospects.