San Francisco Federal Reserve President Mary Daly said in a CNBC interview that the latest US jobs report is good news, describing a labor market strong enough to give the Federal Reserve the latitude it needs to get the job done on inflation — which, she said, has to be the central bank's number one priority.

Her remarks covered the state of the labor market, the outlook for wages, the inflation picture and the Fed's policy path, along with her view on the turbulence in AI-related markets. Comments from regional Fed presidents draw close attention because the Federal Open Market Committee sets the path of US interest rates, and public remarks from its members offer a window into how that thinking is evolving.

Daly said she feels hopeful when she thinks about the American workforce, but drew a distinction between the overall strength of employment and what workers are actually taking home: wage growth isn't booming, and real wages are falling. She added that full employment looks to be pretty stable at this stage, and that stepping back from a period of painful volatility, the economy is showing the kind of rebalancing one would hope for.

On inflation, Daly said she would like her confidence that price pressures are coming down to be higher. Inflation has been too high for too long, she said, and it has to be the number one priority for policy. The Fed's stated goal is 2% inflation over the longer run, which frames why Daly keeps returning to price stability as the central concern. She acknowledged a backdrop of uncertainty — citing tariffs, war and artificial intelligence — but said inflation is proving more stubborn than she would like.

On the path of policy, Daly said the rate hike was the right move, and that it was also good for the Federal Reserve to be on hold at its last meeting. Looking ahead, she said the central bank will have to tighten policy further, and that she is prepared to raise rates if it is called for. At the same time, she thinks the Fed needs to be deliberate: how much more tightening is needed, and when, will require more information. That caution lines up with the data-dependent approach the central bank has emphasized, under which rate decisions hinge on how employment and inflation readings evolve.

On artificial intelligence, Daly said the AI trade has to be orderly, noting that there is quite a bit of commitment to AI. If AI positions are repressing signals of slowing demand, she said, growth might come down a little — though she is not worried about a substantial decline in growth. The attention to market turbulence fits a longstanding preoccupation of Fed policymakers, who track financial conditions because of the role they can play in feeding through to demand and the broader economy.

Daly also said businesses want inflation to come down and are cautiously optimistic about the economic outlook.

In an accompanying analysis, ForexLive described Daly's message as hawkish: inflation is her number one priority, and a resilient labor market gives the Fed room to bring it down. The analysis noted that Daly welcomed the jobs report and sees full employment as broadly stable, while pointing out that wage growth isn't booming and real wages are falling. That distinction matters, it argued, because the jobs market can hold up while inflation still eats into workers' purchasing power.

On rates, the analysis highlighted that Daly called the hike the right move and said holding at the last meeting also made sense. She expects further tightening and is prepared to raise rates if warranted, but wants more information before deciding when to move and how far to go. For traders, the jobs report gives the Fed latitude — and the incoming inflation data will help determine when it uses it.

On AI, the analysis noted that Daly sees substantial investment commitments and wants the adjustment in the trade to be orderly. If the volatility is signaling softer demand, she sees room for growth to slow a little. Her broader read is that businesses remain cautiously optimistic, employment looks stable, and the economy is going through the kind of rebalancing she would hope to see — leaving stubborn inflation as the more pressing concern for policy.

Daly is a voting member of the Federal Open Market Committee — the Fed's rate-setting body — in 2027, meaning she will cast a formal vote on policy decisions that year.

Source: ForexLive