Fed's Daly: Inflation not the only risk

San Francisco Fed President Mary Daly warned about the risk in the labor market, stating that inflation is not the only risk. San Francisco Fed President Mary Daly said that the bank, which aims to control inflation, should act carefully and that inflation is not the only risk they face. Daly, who has a vote in the FOMC this year, said in a speech at an event in San Francisco that they will continue to work to ensure price stability without causing damage to the economy and that they still have a long way to go in reducing inflation. However, arguing that inflation is not the only risk, Daly drew attention to the increase in the unemployment rate and stated that further cooling in the labor market could cause unemployment to rise. Stating that decreasing inflation will probably require restricting demand, Daly said that the unemployment rate has so far remained below sustainable levels at 4 percent, but that a slowdown in the labor market in the future could translate into higher unemployment and that they should monitor this closely. Daly said that this year's inflation figures are not reassuring and commented, "However, the last few data points were a little more encouraging." Last week, some Fed officials said they wanted to see evidence of further inflation before cutting rates. The Fed decided to keep rates unchanged at its last meeting and signaled that it would not rush to cut rates. The Fed lowered its expectation of 3 rate cuts this year to 1 in its last meeting. Daly said officials should be cautious and be open to various scenarios in the economy. In this sense, Daly said that if inflation falls slowly from expectations, rates will have to remain at these levels for a while, and if inflation falls rapidly or the labor market cools more than expected, a cut will be necessary.