Daly: High inflation has persisted for too long; the Fed may need to raise rates further.

Mary Daly, a 2027 FOMC voting member and President of the Federal Reserve Bank of San Francisco, said on Friday that she expects the Fed will need to raise rates further, but like other policymakers, she believes the pace and timing of rate hikes remain uncertain. Daly said: "My expectation is that we will have to tighten policy further. Exactly when to raise rates and by how much remains to be decided, because we must consider all relevant factors." She said: "More tightening may be necessary, and of course... if economic conditions require it, I am prepared to do so." Daly's remarks continued the cautious tone of Fed officials in recent days: on one hand acknowledging that policy may need to be tightened further, while on the other emphasizing that subsequent decisions will depend on economic data. On the same day Daly made these comments, the U.S. Bureau of Labor Statistics reported that the U.S. economy added 165,000 jobs in October and the unemployment rate fell to 4.1%. The unemployment rate is the labor market variable Fed officials watch most closely. These data far exceeded Wall Street expectations. Among them, the number of new jobs was nearly three times the consensus estimate in a Dow Jones survey. Daly called the report "good news for American workers," but also noted that inflation is putting pressure on household finances. The data also showed that average hourly earnings rose 3.1% year over year in October, while inflation measured by the Consumer Price Index (CPI) was 3.7% in September. "They see they can find work, so they keep spending. They have not dropped out of the labor market, but they are still spinning in place under the pressure of high inflation." She said: "High inflation has persisted for too long, nearly six years, and we are really beginning to feel this burden spreading everywhere." Daly said she is generally not worried about economic growth, but is concerned about the persistence of inflation. She said: "The job market remains stable and solid, but it is not booming. You see real wages falling because those wages have not really kept up with inflation." She said: "I think this is key. The news on employment is good, but it is not so clear whether Americans will make real progress in the labor market." The rate-setting Federal Open Market Committee (FOMC) raised the Fed's benchmark overnight borrowing rate by 25 basis points in September to a target range of 3.75%-4%. However, the committee did not follow up with another rate hike last week, saying it preferred to wait for "more information" before deciding its next move. Daly will participate in committee voting next year and said she still prefers a gradual approach. Richmond Fed President Thomas Barkin said on Thursday that he also expects higher rates in the future but is unsure of the timeline. Daly said: "I very much support, and fully believe, that taking action in September was the right thing to do. I also think it was good to hold steady at the last meeting, because the world is full of uncertainty."