The Federal Reserve delivered a 25 basis point cut at the central bank's final meeting of 2024. The Fed also signaled it expects to cut only twice in 2025, a more hawkish forecast than previously indicated, fueling a market sell-off.
San Francisco Fed President Mary Daly sits down with Yahoo Finance Executive Editor Brian Sozzi on Opening Bid to talk about the decision to cut another 25 basis points and how the Fed is thinking about inflation in 2025.
Daly, who voted in favor of the cut, said the decision was "a close call," but she ultimately decided the 100 basis points of recalibration that the Fed did in 2024 was "right-sizing the policy rate level to the economy. "
"Recognizing the progress on inflation, recognizing the labor markets now well balanced. There's one job opening for every unemployed worker. That's a perfect balance. And also the economy we're projecting to have where we have solid labor force growth, labor expansion, and we have inflation continuing to need to come down. So I see the recalibration period now as completed," Daly says.
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"We now, are back to the time [where] we can make our decisions more slowly," the Fed president says, adding the Fed will have to be "have to be agile and data dependent" to "determine how many rate cuts we'll ultimately do next year."
Daly says she can't rule out the possibility that the Fed could raise rates in 2025, but doesn't see it as likely at this point. "I never rule out anything, honestly, because that's a recipe for being behind or [making] mistakes ... But I can tell you where I think the most likely place will be."
"We could have fewer cuts than two [or] we could have more cuts than two, depending on the data. Of course, if inflation, for whatever reason, started to accelerate again, then absolutely I'd be supportive of adjusting the rate upwards, but I don't see that right now on the horizon. But that absolutely would be how we would respond if we saw a reacceleration of inflation."
Check out Opening Bid's full interview with Fed President Daly here.
For full episodes of Opening Bid, listen on your favorite podcast platform or watch on our website.
This post was written by Naomi Buchanan.