San Francisco Federal Reserve President Mary Daly said on Friday that more interest rate hikes are likely, though the timing and extent remain uncertain. Speaking to CNBC, Daly emphasized that the central bank will need to tighten policy further, but the specifics depend on incoming economic data. "My expectation is we're going to have to tighten policy further. Exactly when and how much is still to be decided," she noted.
The Bureau of Labor Statistics reported that the U.S. economy added 165,000 jobs in October, with the unemployment rate falling to 4.1%. These figures exceeded Wall Street expectations, with job creation nearly triple the Dow Jones consensus estimate. Daly called the report "good news for American workers," but highlighted the strain of persistent inflation on household finances. Average hourly earnings rose 3.1% annually, while the September inflation rate stood at 3.7%. "They see that they can get jobs, they continue to spend. They're not out of the game, but they are on a treadmill of high inflation," she said.
Daly expressed concern about the long-term impact of inflation, which has remained high for nearly six years. While the job market is stable, real wages are falling as earnings fail to keep pace with rising prices. "The job market remains stable and solid, but not booming, and you see real wages falling because those wages are not really keeping up with inflation," she explained. Daly also supported the Federal Open Market Committee's decision to hold rates steady at its last meeting, citing global uncertainty.
The Federal Open Market Committee raised the benchmark overnight borrowing rate to a target range of 3.75%-4% in September but opted to wait for more data before making further adjustments. Daly, who will vote on the committee next year, favors a gradual approach. Richmond Fed President Thomas Barkin also indicated that higher rates are likely but remains unsure of the timeline.