San Francisco Federal Reserve President Mary Daly said the central bank will need to raise interest rates further to combat persistent inflation pressure on household finances. Speaking to CNBC on Friday, Daly said the exact timing and magnitude of future increases remain undecided, noting that policymakers must evaluate incoming economic data. She said she is prepared to support additional rate rises if economic conditions warrant them.
Daly's comments came as the Bureau of Labor Statistics reported that the US 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 consensus estimate. Daly called the employment report "good news for American workers," but cautioned that inflation continues to erode household purchasing power.
The wage growth picture remains constrained despite the strong job numbers. Average hourly earnings rose 3.1% annually in October, lagging behind the September inflation rate of 3.7% as measured by the consumer price index. Daly emphasized that workers are facing a difficult situation, saying they can find jobs and continue spending but remain caught on "a treadmill of high inflation." She noted that inflation has remained elevated for nearly six years, creating widespread financial strain.
Daly highlighted that real wages, which account for inflation, are actually falling because wage growth is not keeping pace with price increases. She expressed concern not about economic growth prospects but about the stubborn persistence of inflation. While the job market remains "stable and solid," Daly said it is unclear whether Americans will gain ground in the labor market given the inflation headwinds.
The Federal Reserve raised its benchmark overnight borrowing rate by a quarter percentage point to a range of 3.75%-4% in September. However, the rate-setting Federal Open Market Committee held rates steady at its most recent meeting, deciding to wait for additional information before its next move. Daly, who will vote on the committee next year, said she supported the September increase and approved the recent pause, favoring a gradual approach to further tightening given global uncertainty.
For American households, persistently elevated inflation alongside modest wage growth means purchasing power continues to erode even as employment remains relatively strong.