In this episode of the Odd Lots podcast, Federal Reserve Bank of San Francisco President Mary Daly discusses the recent "hawkish cut" in interest rates. She explains the reasoning behind this decision, noting the importance of avoiding a harsh economic downturn while moving towards a more moderate approach. Daly points to housing inflation and geopolitical issues as significant contributors to ongoing inflation and maintains confidence in the Fed's models, even with some traditional relationships appearing broken. She also touches on how potential policy changes under the new administration and the growing role of AI in productivity could shape the future. Ultimately, Daly suggests that while the neutral interest rate may now be higher than it was before the pandemic, a soft landing for the economy is still achievable.
