“The labor market has softened. And I would see additional slowing as unwelcome,” Daly said Wednesday in remarks prepared for an event in Anchorage, Alaska. “All this means that we will likely need to adjust policy in the coming months.”
That followed comments from Fed Governor Lisa Cook in Boston on the July jobs report, which included significant downward revisions to data covering the last three months. The revisions, she said, were “somewhat typical of turning points” in the economy.Neel Kashkari, president of the Minneapolis Fed, also expressed worry on Wednesday over the slowdown showing up in multiple data points.
“The economy is slowing,” Kashkari said in an interview with CNBC. “In the near term it may become appropriate to start adjusting the federal funds rate,” he said, referring to the central bank’s benchmark rate.He added that he still expects the Fed to lower rates twice before the end of 2025.
Data published last week pointed to a sharp cooling in the labor market over the last few months. Employers added a lower-than-expected 73,000 jobs in July, and gains in the prior two months were revised down by nearly 260,000, according to the Bureau of Labor Statistics. The unemployment rate ticked up to 4.2% from 4.1% in June.
Daly said changing rates would recalibrate policy to better match the risks to the Fed’s inflation and unemployment mandates, which she said are “roughly balanced.”
Still, the San Francisco Fed chief said the central bank has more work to do to fully cool inflation to its 2% target. She added that tariffs will lift prices in the near term, but that effect likely won’t be persistent enough to warrant a response from the central bank.
Earlier this week, Daly said two interest-rate cuts are likely appropriate this year, but that the Fed may need to cut more than twice.
Policymakers left rates unchanged at the end of July and next meet in September. They have two more meetings after that in 2025.
