MNI: Daly Says Fed Should 'Resist Temptation' To Cut Too Soon

San Francisco Federal Reserve President Mary Daly said Friday policymakers must avoid cutting interest rates too early and work remains in the inflation fight.

"To finish the job will take fortitude. We will need to resist the temptation to act quickly when patience is needed and be prepared to respond agilely as the economy evolves," Daly said in prepared remarks for a National Association for Business Economics conference in Washington. "The economy is healthy. Price stability is within sight. But there is more work to do."

Risks to the outlook include a slowing of improvements on the supply side of the economy, new flare-ups in global conflicts, or more unexpected strength in demand, Daly said. "We’ve repeatedly expected spending to slow, only to be wrong. Ongoing economic momentum that outstrips available supply remains a risk to the inflation outlook." (See MNI INTERVIEW: Hot US Economy Complicates Fed Cut Calculus)

The remarks did not specify how many rate hikes Daly sees coming this year, or when she expects reductions to begin. Investors had been betting on as many as half a dozen cuts this year, but throttled back those expectations a bit after recent data showing more persistent inflation.