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San Francisco Fed President Daly sees interest rate cuts coming as labor market weakens

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Mary Daly, president of the Federal Reserve Bank of San Francisco, during the National Association of Business Economics (NABE) economic policy conference in Washington, DC, US, on Friday, Feb. 16, 2024. 

Graeme Sloan | Bloomberg | Getty Images

San Francisco Federal Reserve President Mary Daly on Monday said she expects that interest rates will be cut later this year but declined to provide a timetable or the extent to which the central bank will ease.

With markets expecting aggressive reductions starting in September, Daly said progress on inflation and a clear slowdown in hiring likely will drive the Fed to some extent of policy easing.

“Policy adjustments will be necessary in the coming quarter. How much that needs to be done and when it needs to take place, I think that’s going to depend a lot on the incoming information,” she said during a forum in Hawaii. “But from my mind, we’ve now confirmed that the labor market is slowing and it’s extremely important that we not let it slow so much that it turns itself into a downturn.”

The remarks come the same day Wall Street suffered its worst drawdown in nearly two years as investors wrestled with fears over slowing growth and the Fed’s response. At their meeting last week, Fed officials provided some hints that lower rates are coming but were short on specifics.

In the following two days, consecutive weak reports on layoffs, manufacturing and job creation generated a scare that the Fed is moving too slowly.

A voter this year on the rate-setting Federal Open Market Committee, Daly vowed that policymakers will do what is necessary to achieve their economic objectives.

“We will do what it takes to ensure what we achieve both of our goals, price stability and full employment,” she said. “We will make policy adjustments as the economy delivers the data and we know what is required.”

Earlier in the day, Chicago Fed President Austan Goolsbee told CNBC that the central bank’s “restrictive” rates policy doesn’t make sense if the economy isn’t overheating, which he said it is not. If there are trouble signs with the economy, Goolsbee said the Fed will “fix it.”

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10-year Treasury yield back above 4.6% after mixed jobless claims data

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December 27, 2024

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Treasury yields were slightly higher early Friday after a mixed set of data on weekly jobless claims.

The yield on the benchmark 10-year Treasury was 3 basis points higher at 4.607%, slightly down from its peak earlier in the week but back above the 4.6% level it had not breached since May. The 2-year Treasury was fractionally higher at 4.334%.

One basis point is equal to 0.01%. Yields move inversely to prices.

After the Christmas break, jobless claims data released Thursday for the week ending Dec. 21 came in 1,000 lower at 219,000, below the 225,000 consensus forecast from Dow Jones.

However, continuing claims rose by 46,000 for the week ending Dec. 14 to the highest level since November 2021.

The 10-year Treasury yield has risen more than 40 basis points in December as traders anticipate a more hawkish Federal Reserve in 2025. The central bank next meets at the end of January, when a rate hold is expected.

Monthly data on wholesale inventories is due Friday.

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