Fed's Daly doesn't rule out July rate cut, but doesn't signal eagerness either

Federal Reserve (Fed) Bank of San Francisco President Mary C. Daly noted on Thursday that, despite overall progress on inflation and price stability, price pressures still remain a key issue for the Fed, making it difficult to move policy rates amid ongoing turmoil at the outer edges of economic data.

Key highlights

Still have some work to do on inflation.
We have solid growth, solid labor market.
What's bothersome still is we haven't achieved price stability.
Focus is on inflation; other things don't distract us.
Policy, economy in a good place.
Rates have been restrictive for a significant number of years.
June's Consumer Price Index (CPI) showed some of effect of tariffs.
Other parts of inflation are coming down.

Have not seen any evidence that tariffs are spilling over more broadly into persistent inflation.
May end up with more muted tariff impact than we thought.
Don't want to lower rates preemptively.
Two rate cuts this year 'reasonable' outlook.
Businesses are optimistic, business is not stalling out.
Don't need to slow grow precipitously to get last mile on inflation.
Wouldn't want to see more weakness in the labor market.

Fed policymakers share equal responsibility on setting of interest rates.
The question of a July rate cut is the wrong question.
Whether rate cut happens in July or September isn't most relevant.
Rates will eventually settle at 3% or higher, which is higher than neutral rate pre-pandemic.