Fed Divided Over Pace of Rate Cuts

San Francisco Fed President Mary Daly said she fully supported last week’s 25-basis-point cut but warned that interest rates remain modestly restrictive and that further gradual cuts will likely be needed as policymakers balance risks to inflation and the labor market. She urged a slow, data-dependent approach—monitoring inflation, tariffs, housing and labor-market indicators, including weak hiring for new graduates and low job-finding rates—because moving too quickly could undermine price stability or employment. Daly noted tariffs have had a smaller inflationary impact than many models projected and that recent data show more softness in growth and the labor market than expected. Other Fed officials and outside commentators, however, argue that policy is not excessively restrictive and are pressing for faster, larger cuts, creating a clear debate over the timing and size of future easing. Future decisions, Daly and others said, will hinge on incoming data at each Fed meeting.