Fed's Daly leaves door open to bigger rate cut on further labor market weakness

Investing.com -- San Francisco Fed President Mary Daly on Monday reinforced expectations for a rate cut next month and suggested that a bigger rate cut remains on a monetary policy table should the labor market weaken further.

"Hard to imagine anything that could derail Sept rate cut," Daly said in a Monday interview on Bloomberg. 

The remarks followed Fed Chairman Jerome Powell's message last week at Jackson Hole, Wyo., when he declared that "the time has come to adjust policy," providing a clear signal that rate cuts are ahead. 

While the a 25 basis point rate cut at the September is expected as the most likely outcome, according to Investing.com's Fed Rate Monitor Tool, Daly suggested that further weakening in the labor market could force a bigger cut. 

"If labor market weakens more than anticipated, we we would need to be more aggressive," she said. 

Daly's remarks characterized the shift switch in focus at the Fed to weakness in the labor market compared with a few weeks ago, when she said in an Aug. 18 speech that the labor was slowing but was "not weak."

The upcoming jobs report on Sept. 6 is expected to take on added focus  as it comes ahead of the Federal Open Market Committee meeting on Sept. 17-18.