Mary Daly, the president of the Federal Reserve Bank of San Francisco, indicated on Friday that the central bank is likely to raise interest rates again. While she emphasized the necessity of additional tightening, she joined other policymakers in acknowledging that the specific timing and magnitude of future moves remain undecided.
Speaking in a live interview with CNBC, Daly stated that the bank must continue to evaluate all incoming economic variables. She noted that while more action is likely to be required, she is prepared to act if economic conditions demand it. The comments were made shortly after the release of new labor market data that showed stronger than expected performance.
The Bureau of Labor Statistics reported that the U.S. economy added 165,000 jobs in October. The unemployment rate, which is a key metric for Federal Reserve officials, decreased slightly to 4.1%. These figures significantly exceeded Wall Street forecasts, with job creation nearly tripling the consensus estimate from Dow Jones.
Daly described the employment report as positive news for American workers. However, she highlighted the ongoing financial pressure caused by high inflation. While average hourly earnings increased by 3.1% annually in October, the consumer price index recorded an inflation rate of 3.7% in September. This gap means that wages are not fully keeping pace with the cost of living.
The policymaker used the metaphor of a treadmill to describe the current situation, noting that workers are continuing to spend despite the burden of rising prices. She pointed out that inflation has remained elevated for nearly six years, creating a widespread burden on household finances. Although she does not have major concerns about general economic growth, the persistence of inflation remains her primary worry.
Daly observed that the job market is stable and solid but not booming. She noted that real wages are falling because they are lagging behind inflation. This dynamic represents the core of the current economic challenge, where good news on the employment front does not necessarily translate into a net gain for Americans in the labor market.
The Federal Open Market Committee raised the benchmark overnight borrowing rate by a quarter percentage point in September, setting the target range at 3.75% to 4%. However, the committee chose to hold rates steady at its most recent meeting last week. Officials stated they preferred to wait for more information before determining their next step.
Daly, who will join the committee as a voting member next year, expressed support for a gradual approach to monetary policy. She believed the September hike was the correct decision and that the subsequent pause was wise given the uncertainty in the global environment. Another Fed official, Thomas Barkin, also indicated that higher rates are likely ahead, though the exact timeline remains unclear.
