Federal Reserve official: Interest rates may stay high for longer, but still expected to cut rates this year.

On Friday (April 18) local time, San Francisco Fed President Daly stated that due to rising inflation risks, the Federal Reserve may need to maintain the current interest rate level for longer than expected, but a rate cut is still possible this year. "Compared to a year ago, the current inflation risks are higher, so we may need to maintain a tight policy for longer than originally anticipated," Daly said at an event at the University of California, Berkeley on Friday. "But this does not mean that we will always be tight, as inflation will eventually fall." Since December last year, the Federal Reserve has kept the federal funds rate target range at 4.25% to 4.50%. In last month's Summary of Economic Projections (SEP), the Fed maintained its forecast for two rate cuts this year. Daly stated that she is still satisfied with the median forecast from the March SEP of "two rate cuts this year, each 25 basis points". "If inflation does indeed decline, we must gradually lower interest rates, similar to the approach mentioned in the SEP, to ensure that the economy is not overly tight," she said. However, Daly also emphasized that there is no need to rush. "I can imagine that we will adjust the policy rate at some point in the future, but we don't need to make a decision in haste," she said. "We have plenty of time, we are in a good position now, and we can wait and see." The most significant uncertainty for the future direction of Federal Reserve rates is President Trump's aggressive trade policy. Most economists expect that Trump's tariff policy will temporarily suppress economic growth and push up inflation. Federal Reserve Chairman Powell and several officials have stated this week that the focus of the Fed is to ensure that the price increases caused by tariffs do not evolve into sustained inflation. In contrast, Daly appears more optimistic about the impact of tariffs. "Our current economic conditions are robust, monetary policy remains contractionary, and continues to exert downward pressure on inflation," she said. Daly added that the businesses she has been in contact with are avoiding taking on more risks, but also have not significantly cut investment plans or layoffs. Daly also estimated that the "neutral rate" for the US, excluding inflation factors, is around 1%. The neutral rate refers to the level of interest rates that neither stimulate nor suppress economic growth. This article is reprinted from "Cai Lianshe", edited by GMTEight: Jiang Yuanhua.