San Francisco Fed's Daly is on the wires and says:
- Likely some policy adjustments will be warranted
- Recent inflation prints a relief, but progress bumpy
- My expectation is inflation will come down gradually, labor market is gradually slowing
- Economy looks to be on path where 1 or 2 rate cuts this year would be 'more or less' the appropriate path
- Need more information before we can fully take the next step
- Every meeting is live
- Shelter prices are coming down, but lack of supply means process is slower than in history
- Still more room for monetary policy to push down on shelter inflation
- Decline in super-core ex-housing inflation is welcome
- We are at the point where additional labor market slowing is more likely to result in a rise in unemployment
- Labor market has softened but still solid
- It's a fairly big signal from Fed that so many of us are talking about the labor market
Comments are a little less dovish than the markets view after the CPI, but is still laying the pipe for a cut ahead. The last comment on the labor market is something that Fed chair Powell focused on in his testimony the last two days. It is not just inflation now. It is employment.
Changes in employment tend to trend as companies do not want to be the last to cut excess jobs when the tide shifts.
Conversely, when there is strong demand for jobs, the race to get qualified employees can lead to sharp falls.
The Fed is worried about "job losses beget job losses" environment. It is a tough dynamic to avoid.
