San Francisco Fed President Daly: Two interest rate cuts in 2025 is still a reasonable expectation.

In 2027, Mary Daly, a voting member of the Federal Open Market Committee (FOMC) and President of the San Francisco Fed, stated that she remains satisfied with the Fed's interest rate cut forecast announced in March. The forecast showed that Fed policymakers generally expect the benchmark interest rate to be lowered twice before the end of the year, with a cumulative 50 basis point reduction. Daly also mentioned that the latest information on the US economy is "very positive," with inflation data showing that "consumers have generally experienced good relief." However, she also pointed out that this is an incomplete picture, and there are still some risks to consider. "Until we are confident that inflation will reach our long-term target of 2%, we hope to keep the Fed's policy interest rate at a moderately restrictive level," Daly said in an interview with Fox Business Channel on Friday. "Therefore, I still very much endorse the Fed's economic outlook summaries released in December of last year and March of this year. In my view, the prediction of two interest rate cuts is very reasonable." The San Francisco Fed official also mentioned that the latest information on the US economy is "very positive", especially with the Personal Consumption Expenditures (PCE) inflation data released on Friday showing that "consumers' pressures have been relieved." "But this is only an incomplete part of the picture that we, as Fed policymakers, must pay attention to," she added. "Looking ahead, there are still some economic risks." The Fed has kept the benchmark interest rate unchanged this year due to the continued strength of the US economy and the ongoing uncertainty surrounding policy changes like tariffs. Economists have warned that President Donald Trump's import tariff measures could significantly increase inflation and suppress expectations of US economic growth, with the chaotic rollout of tariffs making it difficult for US businesses and consumers to adapt. Fed officials will hold their next monetary policy meeting on June 17-18, with markets widely expecting them to maintain the benchmark interest rate stability. On Thursday, the US Federal Appeals Court temporarily reinstated Trump's tariff agenda, a day after the US International Trade Court ruled part of his key tariff policy illegal, stating that his emergency power usage was unlawful. Daly's latest remarks echo the "hawkish-dovish mix" comments she made on April 18. She also reiterated that the Fed's monetary policy is in a "good position" to sustain downward inflation trends and stated that as the direction of the US economy becomes clearer, Fed policymakers can maneuver comfortably. A day before Daly's statement, Austin Goolsbee, a voting member of the FOMC and President of the Chicago Fed, said that if tariffs could be avoided through trade agreements or other means, given the potential strength of the US economy and the direction of inflation, the Fed may choose an interest rate cut policy. "If full employment is maintained and inflation returns to target levels, then interest rates can be lowered to the final stable level," Goolsbee said. According to the latest forecasts from Fed policymakers, the long-term neutral interest rate is around 2.5%-3%. Fed policymakers, including Powell, are waiting for the uncertainty surrounding Trump's tariff policy and other policies to be resolved. Policymakers generally say that the US economy remains solid so far, allowing them to maintain patience for a long time. They also state that it is still unclear how wide-ranging tariffs will ultimately be and how they will affect the economy. They anticipate that US unemployment and inflation may rise slightly due to the negative effects of tariff policies, but the ongoing uncertainty of tariff policies makes it difficult for them to judge how the US economy will ultimately evolve. Fed Chairman Powell emphasized at the May rate meeting press conference that the Fed does not need to rush to adjust the benchmark interest rate, as the US economy continues to show resilience. The current policy is moderately restrictive and the cost of further observation is quite low. He also stated that President Trump's calls for rate cuts will not affect the Fed's work.