Fed Daly: The labor market is slowing, tariffs are only having a short-term impact, and the Federal Reserve will cut interest rates soon

Daly, the San Francisco Fed governor, said on Wednesday that she believed the Fed would soon need to cut interest rates, given the slowdown in the labour market and her assessment that tariffs were only a short-term threat to inflation. "Inflation has been gradually declining in the absence of tariffs and should continue to decline as the economy slows and monetary policy remains subdued." She added that while tariffs would be a short-term referral to high inflation, they were unlikely to have a sustained impact. Meanwhile, the labour market is already weak. "I think a further slowdown would be worrisome, and it tends to slide quickly and severely once the labour market falters. All of this means that we will likely need to adjust policy in the coming months."