Rate cut decision was a 'close' call: SF Fed's Mary Daly

The market wasn't surprised by the Federal Reserve's decision to cut the fed funds rate by 25 basis points on Wednesday. But the outlook that showed FOMC members only expect two rate cuts did, sending stocks plummeting. In an interview with Yahoo Finance Executive Editor Brian Sozzi on Opening Bid, San Francisco Fed President Mary Daly said the decision to cut was a "close call" that "took a lot of deliberation" but that she ultimately decided "it was appropriate to reduce it 25 basis points. That will be a hundred basis points of recalibration. And I see that as right-sizing the policy rate level to the economy we have, recognizing the progress on inflation, recognizing the labor market's now well-balanced. There's one job opening for every unemployed worker. That's a perfect balance."

Daly sees the "recalibration period" as "completed" meaning the Fed can now make decisions more slowly as they get more data to process.

On the issue of the 2025 outlook, Daly stresses that it is a projection but that the Fed remains committed to bringing inflation down, "and that will mean restricted policy through the year in all likelihood." Daly says if inflation were to rise, she wouldn't rule out raising rates, but that's not something she sees on the horizon. Ultimately, Daly says, "I do not see that we're done cutting rates. I just see that we're going to adjust rates at a slower pace."

So what will Daly be watching to make her next rate decision? Inflation and employment data, of course. But also what she is hearing from those who live and work in her district. What are they seeing on the ground? Are businesses hiring? Laying people off? On that point, she says, "I'm hearing that they're not really brushing off their layoff plans, they're just thinking carefully about the amount of hiring they do, and they're thinking carefully about whether they refill jobs if people attrit or leave the jobs."

Yahoo Finance's Opening Bid, brings you a high-octane take on the freshest analyst calls, wildest stock moves and shrewdest commentary in the business world. Executive Editor Brian Sozzi puts Wall Street's finest through their paces in this essential conversation for every investor - before the stock market opens.

Find this episode's transcripts and more episodes of Opening Bid at http://finance.yahoo.com/videos/series/opening-bid/.

Thoughts? Questions? Fan mail? Email us at yfpodcasts@yahooinc.com.

Yahoo Finance's Opening Bid is hosted by Brian Sozzi, and produced by Rachael Lewis-Krisky.

Mary Daly is the Federal Reserve Bank of San Francisco President and CEO. 

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