San Francisco Fed President Daly Expects Rate Cuts as Labor Market Weakens

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

While markets are expecting sharp cuts starting in September, Daly said the advance in inflation and the apparent slowdown in hiring are likely to prompt the Fed to ease monetary policy somewhat.

“Policy adjustments will be necessary in the next quarter,” she said at a forum in Hawaii. “I think the magnitude of those adjustments and when they should be made will depend largely on the information coming in. But in my view, we have now established that the labor market is slowing and it is very important that we do not allow it to slow to the point where it becomes a recession.”

The comments come on the same day that Wall Street suffered its worst drop in nearly two years as investors fretted over slowing growth and the Federal Reserve’s response. At their meeting last week, Fed officials offered some hints that lower interest rates were coming but offered no specifics.

In the next two days, back-to-back weak reports on layoffs, manufacturing and job creation raised concerns that the Fed was moving too slowly.

Daly, who this year voted on the Federal Open Market Committee that sets interest rates, pledged that policymakers would do whatever was necessary to achieve their economic goals.

“We will do everything we can to ensure that we achieve our two objectives, price stability and full employment. We will make policy adjustments in light of the data that the economy provides and we know what is needed,” she said.

Earlier in the day, Chicago Fed President Austin Goolsbee told CNBC that the central bank’s “restrictive” interest rate policy makes no sense if the economy isn’t overheating, which he said it isn’t. Goolsbee added that if there are signs of trouble in the economy, the Fed “will fix it.”