Dove sounds rise again! Federal Reserve Daly: Labor market is fragile, may need to cut interest rates once or twice.

Mary Daly, President of the Federal Reserve Bank of San Francisco, recently stated that she believes one or two more rate cuts may be needed to address the weakness in the labor market. Currently, workers are struggling as rising prices erode wage income, and new job opportunities are scarce. "In terms of interest rates, I think we need to maintain an open, very open attitude," Daly said in an interview with the media last Friday. This is her first interview since the Fed kept rates unchanged at the end of last month. At the end of last month, the Federal Open Market Committee (FOMC) voted 10-2 to maintain the benchmark rate unchanged at 3.50% to 3.75%. At the time, Fed governors Milan and Woller both advocated for a rate cut. "I support that decision, but frankly, I think there are reasons to go further and have more rate cuts," Daly said. He added that in deciding on a rate cut, "you must have quite a bit of confidence, really a lot of confidencebe confident that the impact of tariffs will gradually fade... and that inflation is indeed on a downward trajectory." According to the measure favored by the Fed, U.S. inflation hovered around 3% last year, well above the target of 2%. However, many analysts, including some Fed officials, expect commodity inflation to ease in the middle of this year, and overall inflation to slow down again. Daly stated that rate cuts are still needed "to truly worry that the labor market situation is more severe than the current data shows." The US unemployment rate was 4.4% in December last year. Economists surveyed by the media expect the latest non-farm payroll data to be released by the US Department of Labor next week to show that the unemployment rate remained unchanged in January. The market's expectations for non-farm job growth in January are focused in the 60,000 to 80,000 range, and if it is lower than this number, it will stimulate expectations of a rate cut. It is worth noting that the non-farm report to be released next week will also include annual data adjustments. Some investment banks believe that US employment was systematically overestimated in 2025, and annual employment data may be revised down by 1 million. Daly said that although the risks between stable prices and full employment (the two major goals of the Fed) appear "relatively balanced," in her view, the current fragility is more toward the labor market. She said that if companies find that expected demand is not being met, layoffs may increase in the labor market, but given the stable inflation expectations, she does not believe that inflation will rise significantly. "Compared to inflation, I am actually more concerned about the labor market," she said. Daly also pays attention to another important employment market indicator: the number of parents who talk about the difficulty their children have in finding jobs. This phenomenon is also reflected in recent data, with the unemployment rate for recent college graduates higher than that of the overall workforce. "This reflects the instability of the job market," she said, "given the current economic conditions I see, I am inclined to support further rate cuts, but it is hard to say whether it will be once or twice." Federal Reserve Vice Chairman Jefferson, in another event on the same day, said that there is a possibility of a sudden weakening in the US job market, but he believes that the current job market is overall stable and is benefiting from the rate cuts implemented by the Fed so far. This article is reproduced from "Jianglong Society"; GMTEight Editor: Chen Siyu.