MNI BRIEF: Fed's Daly- Cuts Depend On Uncertain Inflation Path

The timing of U.S. interest rate cuts will depend on the path of inflation, and "the confidence bands have widened" on where inflation will be in the next few months, Federal Reserve Bank of San Francisco President Mary Daly said Thursday.

"The three months we've just seen is why you don't declare victory before you get confidence" that inflation will continue to fall toward the central bank's 2% target, she said at the Mercatus Center at George Mason University. "There's considerable uncertainty now about what the next few months of inflation will be. The confidence bands have widened."

"A good scenario would be inflation continues to come down and normalizing the policy rate would be appropriate. If we get a different scenario where inflation just doesn't make much progress, then it's not appropriate to start normalizing rates unless we see the labor market volatility, which is not showing signs of doing so," she said, noting she sees r-star between 0.5% and 1%. (See: MNI INTERVIEW: Demand Boom Keeps Fed Patient For Longer-Koenig)