San Francisco Federal Reserve President Mary Daly said Friday she expected the central bank to raise interest rates more, but joined policymakers in saying the pace and timing remained uncertain.
“My expectation is that we will have to tighten policy further. Exactly when and how much is still to be decided because we just have to take into account all the variables that will come,” Daly told CNBC’s Steve Liesman in a live interview. “More is needed, and of course … I’m prepared to do that if that’s what the economy wants.”
The comments came the same day the Bureau of Labor Statistics reported that the U.S. economy added 165,000 jobs in October while the unemployment rate — the labor market variable Fed officials focus on the most — fell to 4.1%.
Those numbers were better than Wall Street’s expectations. Job creation, in fact, was nearly three times the Dow Jones consensus estimate.
Daly called the report “good news for working Americans,” but noted the pressure inflation is putting on household finances. Average hourly earnings rose 3.1% year-over-year in October, but September’s inflation rate as measured by the consumer price index was 3.7%.
“They see that they can get a job, they continue to spend. They are not out of the game, but they are on the treadmill of high inflation,” she said. “It’s been a long time, almost six years, and we’re really starting to feel the burden spreading everywhere.”
Policymakers say they are not concerned about economic growth but are worried about persistent inflation.
“The labor market remains stable and solid, but it’s not booming, and you’re seeing real wages go down because wages aren’t keeping up with inflation,” Daly said. “I think the bottom line is this. The good news on the jobs front, it’s not clear that America is going to gain ground in the labor market.”
The rate-setting Federal Open Market Committee in September increased the central bank’s overnight lending rate by a quarter percentage point to a target range of 3.75%-4%.
However, the committee last week declined to follow up the increase with another step, saying it would prefer to wait for “the accumulation of more information” before deciding on the next step.
Daly will appoint a committee next year and said he still favors a phased approach. Richmond Fed President Thomas Barkin said Thursday he also sees higher rates ahead but is unsure of the timeline.
“I really support it and think it’s the right move to move in September,” Daly said. “I also think it’s good to hold off on the last meeting because the world is full of uncertainty.”
