San Francisco Federal Reserve president Mary Daly said that one or two more rate cuts this year would still be a "reasonable thing to do" if inflation and the job market cooperate.

If inflation proves to be stickier than expected and the labor market doesn’t settle at a sustainable place, fewer cuts are possible, she added.

The Fed official provided her view on the possible rate path for the rest of 2024 during a question-and-answer session that followed a speech in New York.

In her speech she emphasized that the central bank is "resolute" in its quest to achieve a soft landing, bringing down inflation without causing a recession.

"The work to achieve a soft landing is not fully done," Daly said in her speech titled "Landing Softly Is Just the Beginning," while emphasizing that "we are resolute to finish that job."

Adjusting interest rates to match the economy is "crucial," she added, noting that "it prevents the mistake of over-tightening and ensures we are supporting both of our goals."

The central bank has a dual mandate to maintain price stability and maximum employment.

Daly’s comments come after Fed governor Chris Waller said Monday that the Fed needs to proceed with "more caution" when cutting rates and Minneapolis Fed president Neel Kashkari said it’s "likely" the central bank will make "modest" interest rate reductions in the "coming quarters."

The Fed kicked off a cycle to lower rates over the next 12 to 18 months in September, lowering its benchmark interest rate by half a percentage point and penciling two more rate cuts of a quarter point a piece for the remainder of this year.

Daly on Tuesday called the 50-basis point adjustment "right-sizing," noting that the Fed had been patiently waiting for inflation to come down. Now it wants to ensure that monetary policy is "in line [with] where [the] economy is today."

"At this point it’s clear the direction of change is down and then [the] question is what’s the pace," she said.

Even with the half percentage point cut last meeting, she added, policy is still "restrictive," acting to push down inflation to the Fed’s 2% goal.

But in the weeks since that first cut, the latest reading on inflation showed prices warmed up in September as measured by the Consumer Price Index. That caused some on Wall Street to wonder if inflation is heating back up and if the Fed could slow or pause its new rate-cutting cycle.

A stronger-than-expected September jobs report also caused investors to question whether inflation could heat up and whether the job market is stronger than thought.

But Daly said the labor market has cooled, noting that most measures of the job market are now at or near their pre-pandemic values and that the unemployment rate is hovering around a level she judged as sustainable over the longer run.

"All this means that the labor market has largely normalized and is no longer a major source of inflation pressures," she said.

Daly’s comments aren’t unlike Fed Chair Jay Powell’s remarks on Sept. 30 when he said the Fed intends to do what it takes to keep economic growth humming and avoid recession.

"Overall, the economy is in solid shape; we intend to use our tools to keep it there," Powell said then. "We remain resolute in our commitment to our maximum-employment and price-stability mandates."

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