Daly: hard to hike right now when labor market not steady

Daly: hard to hike right now when labor market not steady

San Francisco Federal Reserve Bank President Mary Daly has expressed concerns about the fragility of the U.S. labor market, emphasizing that current conditions make further interest rate hikes unlikely. In a LinkedIn post and subsequent interview, Daly noted that the "low-hiring, low-firing" labor market remains vulnerable to sudden shifts, such as a transition to "no-hiring, more-firing" scenarios if business demand weakens according to Daly. She highlighted that households and businesses are navigating uncertainty, with inflation remaining above the Federal Open Market Committee's (FOMC) 2% target, compounding the precariousness of the economic outlook.

Daly acknowledged the Fed's dual mandate of price stability and maximum employment as equally pressing but stressed that vulnerabilities are increasingly tilted toward labor market risks. While supporting the central bank's recent decision to maintain the benchmark interest rate between 3.50% and 3.75%, she indicated that "one or two" rate cuts could be warranted to address weakening labor conditions, contingent on confidence that inflation is firmly declining and that tariffs' impacts are receding. The U.S. unemployment rate stood at 4.4% in December 2025, with Daly noting persistent challenges for new college graduates and parents seeking employment for their children as additional indicators of strain.

Daly's comments reflect a cautious approach, balancing the need to avoid premature rate cuts with the recognition of labor market fragility. She emphasized that policymakers must remain "very open-minded" about future rate adjustments while monitoring inflation expectations and employment data closely. As a non-voting member of the FOMC in 2026, her perspective underscores the Fed's ongoing deliberations between inflation control and employment support.