Federal Reserve's Daly makes BIG statement on rate cuts, check details

Fed rate cuts: San Francisco Federal Reserve Bank President Mary Daly threw cold water on expectations of immediate interest rate cuts, citing a strong economy and labour market alongside lingering inflation.

Daly, one of 19 policymakers who set US monetary policy, stressed the importance of a cautious approach during a speech at the Stanford Institute for Economic Policy Research on Monday. While inflation remains above the Fed's target of 2 per cent, a robust economy and low unemployment (3.8 per cent in March) suggest policy isn't overly restrictive.

"The worst thing to do is act urgently when urgency is not required," Daly stated.

This stance marks a shift from March, when many Fed officials anticipated at least three rate cuts this year. Daly herself previously considered that number "reasonable." However, recent strong consumer spending data tempers concerns about overly tight monetary policy.

Daly refrained from offering specifics on potential rate cuts, stressing the need for confidence in inflation's return to the 2 per cent target.

"We have to be thoughtful about not getting too confident that the latest sticky inflation is an indication where we are going forward," she cautioned.

The Fed is currently expected to maintain its current interest rate range of 5.25 per cent to 5.5 per cent until mid-September before implementing potentially two rate cuts by year-end. The recent inflation data, however, adds a layer of complexity to the central bank's decision-making.

(With Reuters inputs.)