The Federal Reserve Headquarters are pictured on March 21, 2023 in Washington, DC. (Photo by Kevin Dietsch / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)
Washington, United States — A senior Federal Reserve official said Thursday that some central bank policy adjustments will likely be warranted as inflation slows and the labor market gradually cools.
But San Francisco Fed President Mary Daly, in a media interview, did not commit to a timing for this shift, maintaining that officials will remain data-dependent in their decisions.
Daly’s comments come shortly after government figures showed that inflation eased more than anticipated last month, with the consumer price index up 3.0 percent — down from 3.3 percent in May.
READ: US consumer inflation eases to 3.0% in June — gov’t
The smaller increase has fueled optimism that the Fed can start cutting interest rates in September, after holding the benchmark lending rate at a decades-high level for months to fight stubborn inflation.
The US central bank had rapidly hiked rates in 2022 as prices surged, in a bid to ease demand.
It is clear that “monetary policy is working,” Daly noted on Thursday.
The inflation data is increasing confidence that the United States is on a path towards policymakers’ two percent target.
“But there remains considerable uncertainty about how the economy will evolve, and we have to think in scenarios as we navigate the future path of policy,” she said.
She cautioned as well that progress on inflation is “going to be bumpy.”
READ: Fed would not wait for 2% inflation to consider rate cut: Powell
Besides inflation, Daly noted that the labor market is at a point where additional slowing is more likely to result in a rise in unemployment.
She added that policymakers will have to monitor this area as they mull future rate decisions.
Earlier this week, Fed Chair Jerome Powell told lawmakers that labor market conditions appear to have returned to where they stood on the eve of the pandemic, “strong, but not overheated.”