Fed's Daly: One or two more Fed rate cuts likely this year

Source Fxstreet

Federal Reserve Bank of San Francisco President Mary Daly said on Wednesday that she "fully" supported the Fed's half of a percentage-point interest-rate cut last month. Daly further stated that one or two more rate cuts this year are likely if the economy evolves as she expects, per Reuters.  

Key quotes

Fully supported half-point rate cut.

Quite confident we are on path to 2% inflation.

We are at full employment.

With policy rate steady, real rate was rising.

Rising real rate was a recipe for overtightening and injuring the labor market.

Rate cut was a recalibration, to rightsize rates for the economy.

Size of September rate cut does not say anything about pace or size of next cuts.

Two or one more cut this year is what is likely.

We will watch data, monitor labor market and inflation.

We will make more or fewer adjustments to rates as necessary.

I do not want to see further slowing in the labor market.

Most firms are seeing a hybrid work situation, not a return to a 5-day-in-the-office situation. 

I am not worried about accelerating inflation. 

I was more worried about injuring the labor market. 

Will watch inflation data carefully. 

Little evidence that balance sheet expansion has much of a direct effect on inflation. 

We are coming near the inflation target but not satisfied, no victory declared. 

Balance sheet is coming down to more normalised levels.

Market reaction 

The US Dollar Index (DXY) is trading 0.01% lower on the day at 102.90, as of writing.

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin Outlook 2025As the Bitcoin market continues to mature, its 2025 outlook appears highly favourable, driven by institutional adoption and regulatory developments.
Author  TradingKey
Jan 23, Thu
As the Bitcoin market continues to mature, its 2025 outlook appears highly favourable, driven by institutional adoption and regulatory developments.
placeholder
Gold price recovers further from one-month low amid a weaker USDGold price (XAU/USD) is building on the previous day's goodish recovery from the $3,248-3,247 region or a one-month low and gaining positive traction for the second successive day on Tuesday.
Author  FXStreet
23 hours ago
Gold price (XAU/USD) is building on the previous day's goodish recovery from the $3,248-3,247 region or a one-month low and gaining positive traction for the second successive day on Tuesday.
placeholder
Eurozone June Inflation Preview: EUR/USD Expected to Rise Initially, Then DeclineOn 1 July 2025, the Eurozone will release its June inflation data.
Author  TradingKey
23 hours ago
On 1 July 2025, the Eurozone will release its June inflation data.
placeholder
Bitcoin Price Forecast: BTC slips below $107,000 even as exchange reserves hit 6-year low Bitcoin (BTC) slips below $107,000 at the time of writing on Tuesday, continuing a mild pullback from the previous day.
Author  FXStreet
20 hours ago
Bitcoin (BTC) slips below $107,000 at the time of writing on Tuesday, continuing a mild pullback from the previous day.
placeholder
Dollar Endures Worst Half in Decades: What's Next for 2025?The dollar experienced its weakest first half in more than 50 years, hurt by geopolitical tensions and former President Donald Trump's trade policies.
Author  Insights
19 hours ago
The dollar experienced its weakest first half in more than 50 years, hurt by geopolitical tensions and former President Donald Trump's trade policies.
goTop
quote