San Francisco Federal Reserve President Mary Daly said the central bank is drawing closer to lowering interest rates, warning that policymakers may ultimately need to deliver more than the two quarter-point cuts they pencilled in at their June meeting. Daly told Reuters she was comfortable with last week’s decision to keep the federal funds target at 4.25%–4.50%, but cautioned that repeating the same stance indefinitely risks misaligning policy with a cooling economy. Daly pointed to mounting evidence of labour-market weakness, including July’s 73,000 payroll gain and large downward revisions that left the prior two months with only 33,000 jobs added. The unemployment rate ticked up to 4.2%, and Daly said further softening would be “unwelcome.” At the same time, she sees no sign that tariff-related price increases are feeding broader inflation, reducing the need to keep rates elevated solely as a precaution. Although two cuts this year still appear “an appropriate amount of recalibration,” Daly stressed that every forthcoming Federal Open Market Committee meeting is “live,” and the Fed must be prepared to act more aggressively if inflation cools and the labour market weakens further. Conversely, a pickup in inflation or a rebound in hiring could justify fewer reductions, she said.