Daily Governor: "Current Interest Rates Appropriate... Concerns Over European and Chinese Economic Recession" [AEA 2025]

2025 AEA Annual Meeting
Interview with San Francisco Fed President
Reaffirming Cautious Monetary Easing Stance
"Labor Supply Also Key Variable... No Further Slowdown Allowed"

Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that the current U.S. benchmark interest rate is at an appropriate level and there is no urgent need to adjust rates considering the economic situation. This reaffirmed the Federal Reserve's (Fed) stance of cautious monetary easing. She identified labor market slowdown as a major risk to the U.S. economy this year, and potential recessions in Europe and China as external variables.

Mary Daly, President of the Federal Reserve Bank of San Francisco. San Francisco ? Photo by Kwon Haeyoung

President Daly said in an interview with Korean reporters at the '2025 Annual Meeting of the American Economic Association (AEA)' held in San Francisco from March 3 to 5 (local time), "We adjusted policy due to falling inflation and changes in the economic situation, and so far we have lowered rates by 100 basis points (1bp = 0.01 percentage points)."

She added, "Our policy has reached a level appropriate for the economic situation, and the economy is in good condition. We have the luxury to be more cautious and gradual, collecting data, assessing the economy, and discussing additional measures."

Earlier, the Fed lowered the benchmark interest rate to 4.25?4.5% at the Federal Open Market Committee (FOMC) meeting in December last year, and significantly reduced the expected number of rate cuts this year from four times at 25bp each (total 100bp cut) to two times (total 50bp cut). Regarding this, President Daly explained, "Considering the current inflation level, strong labor market, and sustained economic growth, that direction (two cuts) is reasonable. However, this was the expectation at the time of the announcement, and if the situation changes, a new assessment will be made."

She cited labor market supply reduction and global growth slowdown as the main risk factors for the U.S. economy this year.

President Daly said, "Labor supply is a key variable for our economy. We need to observe whether the current positive labor supply will continue."

She also emphasized in the 'Monetary Policy' session she attended just before meeting the press, "At this point, I do not want to see further slowdown in the labor market," and "Further slowdown in the labor market is absolutely undesirable." She explained that although the mission to reduce inflation to the 2% target is not yet complete, the labor market should not be harmed in the process.

Adriana Kugler, Member of the U.S. Federal Reserve Board (Fed). San Francisco - Special Correspondent Haeyoung Kwon

Adriana Kugler, a Fed Board member who also attended the same session, said, "We are well aware that inflation has not yet reached the 2% target," but added, "At the same time, we want the unemployment rate to remain at the current level and not rise sharply." The U.S. unemployment rate was 4.2% as of November.

Regarding external variables, President Daly stated, "There is a real risk of global growth slowdown," adding, "Global growth slowdown is occurring, including in Europe and China, and this could be a headwind for the U.S. economy. We will evaluate policy considering these risks."

When asked about the economic policy outlook of the second Donald Trump administration, which will take office on the 20th, she said, "I will not speculate on the new administration's policies," and explained, "The administration changes every four years, but the Fed's goals do not change. We will focus on the two goals of full employment and price stability."