San Francisco Fed President’s Concerns on Job Market and Interest Rates
Mary Daly, the President of the San Francisco Federal Reserve, expressed on Thursday that the weakening U.S. job market could become increasingly alarming if the Fed fails to effectively manage associated risks. Her remarks followed the Fed’s first interest rate cut of the year on September 17, a decision influenced by growing pressure from President Trump.
During an event at the Silicon Valley Directors Exchange, Daly emphasized that the Fed’s choice to decrease interest rates was, in part, a response to easing inflation and a decelerating labor market. She mentioned, “The cuts we made were aimed at addressing risks while striving for a better balance between our inflation and employment targets, with the possibility of further cuts ahead.”
“The economy is experiencing a bit of a slowdown,” she noted. “Consumers are depleting any extra savings they might have had while facing rising prices. Additionally, we have a restrictive monetary policy in place.”
Notably, Federal Reserve Chairman Jerome Powell previously stated that the bank is navigating a “challenging situation” due to inflationary threats and disappointing employment figures.
When asked about artificial intelligence’s potential impact on the U.S. economy, Daly acknowledged that AI could significantly shape economic landscapes, though she added that substantial changes from innovation typically span decades. She referenced Silicon Valley, a major center for AI development, and remarked, “We find ourselves in a unique position where the advantages might come more quickly, not only because of AI’s capabilities but also how companies can harness its power.”
Goldman Sachs reported that AI could potentially displace 6-7% of the U.S. workforce, while their analysis suggested that around 2.5% of jobs could be at risk due to AI-related job losses.
Additionally, John Williams, President of the New York Federal Reserve, shared his views with the New York Times, indicating support for additional rate cuts this year. “I’m quite concerned about the prospect of a further slowdown in the labor market,” Williams stated. He added, “While we advocate for lower rates this year, it’s vital to understand the implications of that move.”
