Is The Fed's Effective Policy Implementation? This is Mary Daly's Fed Review


The President of the Federal Reserve Bank of San Francisco, Mary Daly, on Friday said she believes inflation is gradually easing, saying the latest data showed inflation did not rise at all from April to May and that it was "good news that policy is working."

"We have evidence that the (policy) applied is quite strict," Daly said in an interview. "We're seeing slower growth, slower spending, a slower labor market, lower inflation."

However, Daly said there is still a lot of work to be done and he expects inflation to be above the Fed's 2% target possibly until the end of 2025.

Commerce Department data showed the price index of personal consumption expenditures (PCE) – the Fed's preferred measure of inflation – was unchanged on a monthly basis in May and rose 2.6% annually, in line with expectations.

Excluding volatile food and energy components, the core figure rose 0.1% month-on-month and 2.6% year-on-year.

The odds of a rate cut in September rose to 68% from 61% before the data, according to LSEG FedWatch data.

Although the Fed only predicted one interest rate cut this year in December, market participants are sticking to the expectation of two cuts starting in September, in hopes of a continued downward trend in inflation and because the economy is still exposed to the highest interest rates in decades.