Fed’s Daly says price stability must not ‘harm the economy’

Mary Daly says the Fed cannot restore price stability by “harming the economy,” underscoring a cautious stance on rates as inflation lingers above target.

Mary Daly, president of the Federal Reserve Bank of San Francisco, said restoring price stability remains “crucial” for the U.S. central bank, but warned that the Federal Reserve cannot pursue that goal in a way that “harms the economy,” according to a summary of her latest remarks.

The comments, reported via Chaincatcher, signal that Daly continues to frame monetary policy as a balancing act between bringing inflation back to the Fed’s 2% target and preserving labor market strength.

Daly’s emphasis on balance builds on earlier statements where she has described policy as “in a good place” and argued the Fed can “afford patience” as it evaluates incoming data. In a prior speech, she said monetary policy must be calibrated carefully because “progress is not victory” on inflation, and that uncertainty about both price pressures and employment requires a scenario based approach rather than a single forecast path.

Daly’s balancing act on inflation

In earlier public appearances, Daly has stressed that the Fed’s dual mandate requires it to “stay on our policy course if we’re going to do our part to restore price stability,” even as she acknowledged that inflation had been “coming in too high.” At the same time, she has repeatedly warned that keeping rates “too high for too long” risks undermining employment, arguing that if restrictive policy causes mass layoffs, “you’ve given people low inflation, but you’ve taken their jobs,” which she said is “not the dual mandate.”

That tension is visible in more recent commentary, where Daly has urged a “measured, data‑dependent approach” and insisted the Fed must “work on price stability without overreacting.” Market participants have interpreted those remarks as a signal that the Federal Open Market Committee is likely to hold its policy rate in the current 5.25 to 5.50% range for longer, delaying rate cuts until there is clearer evidence that inflation is firmly on track to 2%.

Implications for markets and policy path

Daly’s latest message that price stability cannot be achieved by “harming the economy” underscores why many officials remain wary of aggressive moves in either direction. Her stance aligns with projections from banks such as Goldman Sachs, which recently pushed back expectations for the first Fed rate cut to September 2026 and now sees inflation running near 2.9%, implying restrictive policy for longer and a tougher backdrop for risk assets.

While Daly did not provide specific forecasts for growth, unemployment or the exact timing of any rate adjustments in the Jin10 summary, her comments suggest the Fed will continue to lean on incremental, data‑driven decisions rather than pre‑committing to a rapid easing cycle. For investors across bonds, equities and crypto, her insistence that the central bank must both “restore price stability” and avoid “harming the economy” reinforces the idea that the Fed is steering a narrow path between renewed inflation and a policy induced downturn.