Summary:
Fed’s Daly says monetary policy is “in a good place” to respond to economic shifts
Incoming data show solid growth, stabilising labour market and easing inflation
Fed cut rates by 75bps last year to offset labour-market cooling
Uncertainty remains around both inflation and employment risks
Daly signals preference for patience and deliberate calibration
U.S. monetary policy is currently well placed to respond to how the economy evolves, but future decisions will need to be made carefully and deliberately given lingering uncertainties around both inflation and employment, San Francisco Federal Reserve President Mary Daly said on Thursday, US time.
Daly said recent U.S. economic data have been encouraging, with growth projections remaining solid, the labour market showing signs of stabilisation, and inflation expected to continue easing through 2026. Taken together, those trends suggest the economy is moving closer to balance after a period of elevated price pressures and cooling employment conditions.
Daly noted that the Federal Open Market Committee cut interest rates by a cumulative 75 basis points last year in response to a marked slowdown in labour-market momentum and inflation outcomes that proved milder than previously expected. Those moves, she said, were designed to prevent the economy from weakening too sharply while keeping progress toward price stability intact.
Despite the improved backdrop, Daly cautioned that uncertainty remains high. Risks persist on both sides of the Federal Reserve’s dual mandate of maintaining price stability and achieving maximum employment, underscoring the need for a measured approach going forward. “We will need to be deliberate as we calibrate policy,” she said, emphasising that the central bank must balance the risk of doing too much against the risk of doing too little.
Her remarks come ahead of the Fed’s January 27–28 policy meeting, where officials are widely expected to leave interest rates unchanged in the current 3.50%–3.75% range after a run of rate cuts last year. In Fed-watcher parlance, Daly’s description of policy being in a “good place” is typically interpreted as signalling comfort with holding rates steady while assessing how earlier easing works through the economy.
Daly also stressed that policymaking cannot rely solely on individual data releases. While economic data, analysis and models remain critical, she said direct feedback from businesses, households and communities provides valuable insight into underlying conditions and future trends that may not yet be visible in official statistics.
By combining quantitative data with real-world intelligence, Daly said the Fed can better respond to changes in the outlook and ensure monetary policy remains appropriately calibrated as the economy moves into its next phase.
