Fed official calls for gradual interest rate cut

Federal Reserve headquarters

Mary Daly, President of the San Francisco Federal Reserve, said the central bank should take a gradual approach to lowering borrowing costs, The Financial Times reported.

She added that the recent economic data gave her more confidence that inflation is under control. "It is time to consider adjusting borrowing costs from their current range of 5.25% to 5.5%," she said.

Daly played down the need for a dramatic response to signs of a weakening labor market, noting that the US economy was showing little evidence of heading for a deep downturn.

The speed to ease the US rates will be a central question on the lips of policymakers when they gather later this week at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming.

The Fed is expected to lower the interest rate by 25 basis points in its September meeting, marking the first cut in four years.