By Michael S. Derby, Ann Saphir

(Reuters) -Federal Reserve policymakers, fresh from an interest rate cut this week, fleshed out on Friday the case for reducing borrowing costs more slowly next year as they assess progress in lowering inflation and the impact of tariffs and other policies promised by President-elect Donald Trump. 

San Francisco Fed President Mary Daly, who supported the U.S. central bank’s decision on Wednesday to cut its benchmark overnight rate by a quarter of a percentage point to the 4.25%-4.50% range, and Cleveland Fed President Beth Hammack, who dissented against it, both said the meeting’s outcome was a “close call.”

Daly and two other Fed policymakers who spoke on Friday said they felt the central bank would likely resume its rate-cutting next year, but signaled they would take their time doing so now that, as Daly put it, the “recalibration phase” is over.

“We’re in the next phase, and that next phase is really looking at the incoming information,” Daly said in an interview with Bloomberg Television. 

The U.S. central bank cut rates by a total of 100 basis points in 2024, bringing monetary policy to a somewhat less restrictive stance as inflation fell from much higher levels earlier in the year and the labor market cooled. 

Fed policymakers’ projections released on Wednesday showed most of them now see two quarter-percentage-point rate cuts in 2025, fewer than the 100 basis points they had forecast in September.

Daly said she was comfortable with that rate-cut projection, citing the need to push down on still-elevated inflation and noting that the labor market has held up better than thought. Still, she said, the Fed could end up doing more or less, depending on the data. 

While Daly said it’s too early to guess how the new Trump administration’s policies will affect the outlook, Chicago Fed President Austan Goolsbee told CNBC that it was that very uncertainty that caused him to pencil in a shallower rate-cutting path next year than the 100 basis points he had previously thought would be needed.

Goolsbee, however, noted that he continues to believe inflation is headed down to the Fed’s 2% target, and that means more rate cuts. 

“Over the next 12 to 18 months, rates can still go down a fair amount,” he said. “And whether that happens three months earlier or three months later, I don’t think is the most material thing.”

‘IN A GREAT PLACE’     

The U.S. Commerce Department reported earlier on Friday that inflation, based on the Fed’s preferred measure, was 2.4% last month, less than what economists polled by Reuters had expected. 

The Personal Consumption Expenditures Price Index excluding volatile food and energy items, which the Fed uses to gauge underlying momentum in prices, rose 2.8%, in line with what Fed Chair Jerome Powell said he was anticipating when he embraced a “cautious” approach on further rate adjustments in his post-meeting press conference on Wednesday. 

The data prompted financial markets to firm up bets on a Fed rate cut in March, with one more reduction seen as probable by September. Before the release of the report, traders had given only about even odds on a second Fed rate cut by the end of 2025.

“I think we’re in a great place, well-positioned” for what lies ahead,” New York Fed President John Williams said in a separate interview with CNBC, adding that his baseline expectation continues to be that further rate cuts are coming.

Like Goolsbee, Williams said he had factored in some thinking on the likely impact of Trump’s agenda into his own forecasts, but said there was still a lot of uncertainty.

“We need to be data-dependent, and we have time to really assess the data, assess what’s happening, and come to the best judgments.” 

In a statement explaining her dissent this week, Hammack said she felt the economy’s strength argued against another rate cut at this time, and she wanted to hold the policy rate steady until there is more evidence that inflation is resuming its path toward the 2% target.

(Reporting by Dan Burns; Writing by Ann Saphir; Editing by Ros Russell and Paul Simao)

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