PALO ALTO, California- There is “no urgency” to cut US interest rates, Mary Daly, the president of the San Francisco Federal Reserve Bank, said on Monday, with the economy and labor market strong, and inflation still above the Fed’s target of 2 percent .
The Fed is increasingly expected to hold its policy rate steady in the range of 5.25 percent to 5.5 percent until mid-September, more than a year past its last rate hike, before cutting rates just twice before year-end, but inflation in the first three months was higher than most forecasters expected.
“The worst thing to do is act urgently when urgency is not required,” Daly, one of 19 US central bankers who set monetary policy, said at the Stanford Institute for Economic Policy Research.
As recently as March most Fed policymakers saw at least three rate cuts by year’s end. But strong consumer spending, and a labor market in which unemployment was 3.8 percent last month, give little cause for concern that policy is too tight.
Just two weeks ago Daly said three rate cuts this year would be “reasonable.”
She did not repeat that view on Monday, nor offer any clear signal on when she might be ready to consider a rate cut, except for saying she would need to be confident inflation was headed toward 2 percent .
“Policy is in a good place; we are in a ready position,” she added.
“We have to be thoughtful about not getting too confident that the latest sticky inflation is an indication where we are going forward, and we can’t get too confident that our projection that inflation will continue to come down is going to materialize.”
Meanwhile, US Treasury Secretary Janet Yellen will meet with finance ministers from US allies this week to discuss a number of key issues, including shoring up supply chains, strengthening financial system stability and supporting Ukraine, a senior US Treasury official said on Monday.
Yellen’s meetings on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington also will include in-depth discussions with Chinese officials on “balanced growth,” a new US -China dialogue launched earlier this month to address China’s excess industrial capacity for electric vehicles (EVs), solar panels and other clean energy goods.
On Wednesday, Yellen will meet with finance ministers from South Korea and Japan for a first-ever trilateral meeting to coordinate on issues from sanctions on Russia and Iran to securing supply chains and building climate and financial resilience in the Pacific Islands, the Treasury official said.
Yellen also will participate in a financial stability exercise with British and European banking union officials “to help fortify our financial systems for rapid coordination and communication during times of financial stress,” the official said.
Finance ministers from the Group of Seven industrial democracies and Group of 20 major economies also are due to meet this week. During the G7 meeting Yellen hopes to advance discussions among the allies to unlock the value of frozen Russian sovereign assets to support Ukraine’s resistance to the Russian invasion.
