Fed needs to continue to cut rates, Daly says

(Reuters) – San Francisco Federal Reserve Bank President Mary Daly on Monday said she has not seen anything to suggest the U.S. central bank would stop cutting interest rates, which are “absolutely” still high enough that they are restraining the economy.

Daly, in a webcast interview with the Wall Street Journal, added that the goal is a “soft landing” where inflation cools to 2%, the labor market stays healthy, and wages catch up with higher prices.

She said the Fed needs to continue to lower the policy rate as inflation comes down, or risk allowing policy to become overly tight and hurt the labor market.

The policy rate, after the Fed’s 50-basis-point rate cut last month, is now in the 4.75%-5% range; Daly on Monday said she estimates that a policy rate of around 3% would be a level that is neither tight nor loose but what economists call “neutral.”