The Fed Sees a Fall Rate Cut as More Likely

San Francisco Federal Reserve President Mary Daly signaled that easing monetary policy as early as the summer would be premature, arguing that waiting until the autumn will give officials clearer evidence on whether inflation’s latest slide is durable.

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Speaking on CNBC Friday, Daly explained that businesses in her district want certainty before committing to new investments, and she believes additional data collected over the next several months—covering consumer prices, wages, and job creation—will sharpen the Fed’s judgment about the appropriate timing for a rate reduction.
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Her comments contrasted with Fed Governor Christopher Waller’s remarks earlier the same day, when he suggested the central bank could begin lowering borrowing costs at its July 29‑30 policy meeting.
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Daly acknowledged that three consecutive months of unexpectedly subdued inflation readings were “really good news,” yet she cautioned against the impulse to celebrate too quickly, noting that a single favorable trend can reverse amid supply‑side shocks or shifts in consumer demand.
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By emphasizing patience, she framed the debate around the Fed’s dual mandate—maximum employment and price stability—and stressed the need to balance both objectives rather than chasing one at the expense of the other.
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According to Daly, lowering rates too soon risks reviving inflationary pressures, eroding public confidence in the Fed’s credibility, and forcing officials into rapid course corrections that could jolt markets.
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Conversely, delaying cuts until data confirm a sustainable downtrend in prices affords policymakers room to ensure the labor market remains sturdy while inflation continues to cool.
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Daly’s public stance effectively sets a marker for the September or November Federal Open Market Committee meetings, both of which fall squarely in the early‑to‑mid‑autumn window she references.
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By then, officials will have reviewed several additional consumer‑price and employment reports, quarter‑over‑quarter GDP figures, and business sentiment surveys that could either reinforce the case for easier policy or signal lingering inflation stickiness.
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She said executives in technology, agriculture, and shipping sectors repeatedly express concern about input costs, logistics bottlenecks, and wage expectations—variables that could resurface if monetary conditions loosen prematurely.
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Daly’s perspective carries weight because, even if she does not hold a 2025 voting slot on the FOMC, her district spans a vast portion of the western United States, and her anecdotal intelligence often shapes internal discussions.
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Moreover, by positioning herself toward the cautious middle of the committee, Daly helps bridge views between traditionally hawkish governors wary of reigniting inflation and dovish regional presidents eager to cushion growth.

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Her remarks also come at a moment when financial markets appear divided on the path ahead, with futures traders pricing in roughly fifty‑fifty odds of at least one quarter‑point cut by September but lacking conviction beyond that horizon.
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Bond yields have drifted sideways in recent weeks, reflecting both relief that inflation is receding and worry that fresh geopolitical tensions—particularly elevated shipping insurance costs in the Middle East—could push goods prices higher again.

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Daly hinted that any resurgence of supply‑driven inflation linked to tariffs or conflict would complicate attempts to declare victory too soon, underscoring why she prefers additional confirmation before pulling the trigger on easier policy.
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At the same time, she recognized that policy must remain flexible; if incoming data unexpectedly deteriorate, delaying action could expose households and smaller firms to unnecessary financial strain.
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In that scenario, she said, the committee retains the option to act swiftly even outside the scheduled meeting cadence, citing historical precedents where officials cut rates between meetings to stabilize conditions.
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Nevertheless, Daly emphasized that the baseline outlook does not yet justify that kind of urgency; instead, she sees a steady, if uneven, disinflation process unfolding as supply chains normalize and post‑pandemic consumption patterns settle.
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She also pointed to early signs that wage growth, while still above pre‑COVID norms, is easing toward a level consistent with the Fed’s two‑percent inflation goal, a metric she views as indispensable to any sustained moderation in prices.
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Further, Daly stressed that the Fed cannot rely solely on backward‑looking indicators; officials must gauge forward‑looking expectations embedded in financial markets and household surveys, both of which have inched lower but remain volatile.
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Her wait‑for‑autumn strategy, therefore, reflects a desire to align policy decisions with firmer evidence that inflation expectations are anchored, preventing a scenario in which households pre‑emptively accelerate purchases or firms lock in higher prices.
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Daly’s remarks arrive at a pivotal juncture for the broader policy conversation, as other central banks—from the Bank of Canada to the European Central Bank—have begun or signaled imminent easing, raising questions about global capital flows and currency dynamics.
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Yet she argued that the United States faces its own unique mix of fiscal stimulus, consumer resilience, and structural labor shortages, making a one‑size‑fits‑all approach inappropriate.
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Regarding communication strategy, Daly said it is essential for the Fed to explain the conditional nature of any future moves, so businesses and households understand that rate cuts will hinge on realized progress rather than predetermined dates.
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She added that clear messaging reduces the risk of market misinterpretation, which can manifest as abrupt swings in bond yields or equity valuations that undermine the Fed’s objectives.

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While some analysts worry that delaying easing could tip the economy into a sharper slowdown, Daly indicated she currently sees no evidence of imminent recession, citing robust service‑sector hiring and healthy household balance sheets.
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Instead, she envisions a glide path toward a “soft landing,” where growth cools just enough to tame inflation without a significant rise in unemployment.
Ultimately, Daly’s preference to wait until fall underscores the Fed’s evolving consensus: celebrate the recent inflation progress but verify its persistence before shifting gears.
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Her stance sets up a lively debate heading into the July meeting, where officials like Waller may argue for quicker action, while others echo Daly’s caution. Investors, meanwhile, must parse each speech, data release, and corporate earnings report for clues, knowing that even after three months of benign inflation, the final mile back to the Fed’s target remains fraught with uncertainty. Until that uncertainty clears, Daly suggests patience remains the most prudent course, ensuring the Fed’s next decision is informed by evidence rather than hope.

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