US Fed officials are "hawkish"! Daly: Current monetary policy positioning is "good"!

Mary Daly, president of the Federal Reserve Bank of San Francisco, said on Sunday that she believes the US Fed's current monetary policy stance is "good," and that the risks to the US employment and price stability goals are roughly balanced.

On the same day, after delivering a speech in San Francisco prepared for the centennial annual meeting of the Western Economic Association International, Daly stated, "We must adjust our policies in response to changing circumstances, while keeping these two goals in mind."

In her latest remarks, Daly did not comment on the economic outlook or policies. She merely noted that public guidance on interest rates can sometimes "come at a cost."

Daly said that officials should "guide based on what we know, remain humble about what we don't know, and commit to responding to the world we're in, even if it differs from what we expect."

Daly's latest remarks conveyed a similar message to her speech on Friday. At that time, she indicated that the fundamentals of the US economy were evolving in a direction that might necessitate an interest rate cut. However, she suggested that a rate cut in July might be premature and that action in the autumn seemed more appropriate.

"Unless we see a significant downturn in the labour market that we believe will persist, I think action in the autumn is more appropriate. By then, we will have more information, and businesses have told me they hope to have some solutions by then," she said.

Last week, the US Fed continued to "hold steady," maintaining the target range for the federal funds rate at 4.25%-4.5% and suggesting that there remains significant uncertainty about the economic impact of President Trump's tariffs. This marked the fourth consecutive meeting where the Fed has kept rates unchanged since cutting them by 100 basis points last year.

The latest forecasts from officials indicate that they expect economic growth to slow down, inflation to rise, and the unemployment rate to increase, with differing views on the interest rate outlook. The recently released "dot plot" revealed internal contradictions within the Fed: while the median expectation remains for two rate cuts this year, the number of officials predicting no rate cuts this year has increased from four to seven. Meanwhile, the number of officials predicting at least two rate cuts this year has decreased by one compared to three months ago.

Furthermore, the divisions within the Fed are evident from the remarks made by officials after the meeting. Earlier on Friday, Fed Governor Christopher Waller, one of the leading candidates for the next Fed Chairman, stated that he does not expect tariffs to significantly drive up inflation, and therefore policymakers should consider lowering interest rates as early as July.

Waller said he believed the US Fed should cut interest rates to avoid a potential slowdown in the labour market. "Why should we wait until we see the economy really collapse before we start cutting interest rates? Maybe we should start considering an interest rate cut at the next meeting, rather than waiting until the job market collapses," he said.

Thomas Barkin, president of the Federal Reserve Bank of Richmond, holds a similar view to Mary Daly. He said that there was no urgent need for the US Fed to cut interest rates at the moment, as the risks of tariffs on inflation had not yet materialized, and the job market and consumer spending remained stable.