San Francisco Federal Reserve President Mary Daly: Two rate cuts in 2025 are still a reasonable expectation

According to the Zhitong Finance APP, Mary Daly, a voting member of the Federal Open Market Committee (FOMC) and President of the San Francisco Federal Reserve, stated that she remains satisfied with the Federal Reserve's interest rate cut forecast released in March, which indicates that policymakers generally expect the benchmark interest rate to be lowered twice by the end of the year, totaling a 50 basis point cut. Daly also mentioned that the latest information regarding the U.S. economy is "very positive," and inflation data shows that "consumers are generally in a much better position," but she also pointed out that this is only an incomplete picture and there are still some risks to consider.

"Before we are confident that inflation will reach the long-term target of 2%, we want to keep the Federal Reserve's policy benchmark interest rate at a moderately restrictive level," Daly said in an interview with Fox Business on Friday. "Therefore, I still strongly endorse the Federal Reserve's economic outlook summary released last December and this March; in my view, two rate cuts are a very reasonable forecast."

The San Francisco Fed president also stated that the latest information regarding the U.S. economy is "very positive," especially the PCE inflation data released on Friday, which shows that "consumer pressures have been well alleviated."

"But this is only an incomplete part of the picture that we as Federal Reserve policymakers must pay attention to," she added. "Looking ahead, there are still some economic risks."

The Federal Reserve has kept the benchmark interest rate unchanged this year, primarily due to the continued strength of the U.S. economy and the persistent uncertainty brought about by tariff and other policy changes. Economists generally warn that the import tariff policy led by President Donald Trump could significantly raise inflation and suppress U.S. economic growth expectations, and the chaotic implementation of tariffs makes it difficult for U.S. businesses and consumers to adapt.

Federal Reserve officials will hold their next monetary policy meeting on June 17-18, and the market generally expects them to maintain the benchmark interest rate stable once again.

On Thursday, the U.S. Court of Appeals temporarily reinstated Trump's tariff agenda, a day after the U.S. International Trade Court ruled that key aspects of his tariff policy were illegal, stating that his use of emergency powers was unlawful.

Daly's latest comments reflect a "hawkish-dovish" stance, echoing her remarks made on April 18. She also reiterated that the Federal Reserve's monetary policy is in a "good position" to keep inflation on a downward trajectory and stated that as the direction of the U.S. economy becomes clearer, Federal Reserve policymakers can maneuver freely.

The day before, Austin Goolsbee, a voting member of the FOMC in 2025 and President of the Chicago Federal Reserve, stated that if tariffs could be avoided through trade agreements or other means, considering the potential strength of the U.S. economy and the direction of inflation, the Federal Reserve might choose to implement a rate cut policy. "If we maintain full employment and inflation returns to target levels, then interest rates can be lowered to a stable low level," Goolsbee said. According to the latest forecasts from Federal Reserve policymakers, the long-term neutral interest rate is about 2.5%-3%.

Federal Reserve policymakers, including Powell, are waiting for the uncertainties surrounding Trump's tariff policy and other policies to be fully resolved. Policymakers generally state that the U.S. economy remains solid so far, allowing them to maintain patience for an extended period They also stated that it is currently unclear how extensive the tariffs will ultimately be and how they will affect the economy. They expect that the unemployment rate and inflation in the United States may rise due to the negative impacts of the tariff policy, but the ongoing uncertainty surrounding the tariff policy makes it difficult for them to assess how the U.S. economy will ultimately evolve.

Federal Reserve Chairman Jerome Powell emphasized at the press conference following the May interest rate meeting that the Federal Reserve does not need to rush to adjust the benchmark interest rate. The U.S. economy continues to show resilience, the current policy is moderately restrictive, and the cost of further wait-and-see is relatively low. He also stated that President Trump’s calls for interest rate cuts will not affect the work of the Federal Reserve