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Fed’s Daly Signals Openness to Interest-Rate Cut in September

(Bloomberg) -- Federal Reserve Bank of San Francisco President Mary Daly suggested policymakers will be ready to lower interest rates soon, adding that inflation stemming from tariffs will likely prove temporary.

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“It will soon be time to recalibrate policy to better match our economy,” she wrote Friday in a brief social media post shared by the San Francisco Fed. She said tariff-related price increases “will be a one off.”

“It will take time before we know that for certain,” she wrote. “But we can’t wait for perfect certainty without risking harm to the labor market.”

Fed officials have held interest rates steady this year at a 4.25%-4.5% range. Daly’s comments echoed remarks from Chair Jerome Powell, who last week opened the door to an interest-rate cut as soon as the Fed’s next policy meeting in September, pointing to recent economic data showing a sharp slowdown in hiring.

“Congress has given the Fed two goals: full employment and price stability. Both are in tension at the moment, with tariffs pushing inflation higher and the labor market showing signs of slowing,” Daly said.

Policymakers are still trying to gauge the economic impact of Trump’s aggressive trade policy changes. Data published earlier on Friday showed consumer spending rose in July by the most in four months, underpinning signs of resilience across the economy.

Yields on short-term Treasury bonds fell to a intra-day low, after Daly’s comments.

The San Francisco Fed chief, who doesn’t vote on monetary policy this year, said earlier this month that an outsize rate adjustment in September wasn’t needed, though she still expected two interest rate cuts this year.

--With assistance from Edward Bolingbroke.

(Updates with more details on market reaction and economic data on sixth paragraph.)