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Fed should not act urgently to cut rates unless required, Daly says


By Ann Saphir

PALO ALTO, California (Reuters) -There is “no urgency” to cut U.S. interest rates, Mary Daly, the president of the San Francisco Federal Reserve Bank, said on Monday, with the economy and labor market strong, and inflation still above the Fed’s target of 2%.

The Fed is increasingly expected to hold its policy rate steady in the range of 5.25% to 5.5% until mid-September, more than a year past its last rate hike, before cutting rates just twice before year-end, but inflation in the first three months was higher than most forecasters expected.

“The worst thing to do is act urgently when urgency is not required,” Daly, one of 19 U.S. central bankers who set monetary policy, said at the Stanford Institute for Economic Policy Research.

As recently as March most Fed policymakers saw at least three rate cuts by year’s end. But strong consumer spending, and a labor market in which unemployment was 3.8% last month, give little cause for concern that policy is too tight.

Just two weeks ago Daly said three rate cuts this year would be “reasonable.”

She did not repeat that view on Monday, nor offer any clear signal on when she might be ready to consider a rate cut, except for saying she would need to be confident inflation was headed toward 2%.

“Policy is in a good place; we are in a ready position,” she added.

“We have to be thoughtful about not getting too confident that the latest sticky inflation is an indication where we are going forward, and we can’t get too confident that our projection that inflation will continue to come down is going to materialize.”

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