San Francisco Federal Reserve President Mary Daly signaled on Friday (April 18) that although she still expects a couple of interest rate cuts this year, persistent inflation risks could mean fewer cuts than previously anticipated — especially as the economy remains resilient despite policy uncertainties under President Donald Trump.
Speaking at an event hosted by the University of California, Berkeley’s Fisher Center for Real Estate & Urban Economics, Daly emphasized a cautious approach:
“Continuing to gradually reduce the policy rate, without rushing, is the appropriate course of action,” she said. “At the end of the day, we made a single promise to the American people — to restore price stability. That is the cornerstone of everything else we aim to achieve.”
Since December, the Fed has kept its benchmark interest rate steady between 4.25% and 4.5%. Policymakers have acknowledged that tariffs could push inflation higher and slow growth, but many — including Fed Chair Jerome Powell — prefer to take a “wait and see” approach before making any changes, a stance Daly echoed.
The Fed’s measured strategy has drawn sharp criticism from Trump, and on Friday, a Trump adviser revealed the administration is considering ways to remove Powell from his post.
Daly noted the possibility that the Fed could cut rates more aggressively if inflation cools quicker than expected or if the labor market shows signs of weakening. However, she warned that the greater risk lies in inflation staying elevated.
“The economy is moving toward the sustainable path we aimed for, where we can eventually return the rate to neutral,” Daly said, estimating the neutral policy rate at about 3%. Still, she added, “inflation remains above our target, and risks to inflation are higher now than they were a year ago. That could mean maintaining tighter policy longer than we had anticipated.”
Given the slow pace of progress on inflation, Daly stressed that a restrictive monetary stance is necessary for now. A strong economy, she said, gives the Fed the flexibility to wait for more clarity on the full effects of the Trump administration’s policies — including tax cuts, spending reductions, deregulation, and immigration changes. So far, she observed, uncertainty around these policies hasn’t significantly slowed economic momentum.
“We’re not seeing people retreat or hold back,” Daly said. “Uncertainty hasn’t paralyzed activity — people are still ready to move forward.”
She also pointed out that recent signals suggest Trump’s tariff measures may be narrower and less immediate than originally announced, potentially softening their impact on the economy.
