Market Data 
By Howard Schneider
FAIRFAX, Virginia (Reuters) – There is “considerable” uncertainty about where U.S. inflation will head in coming months, San Francisco Federal Reserve President Mary Daly said on Thursday, while adding she still has faith that price pressures are continuing to ease.
“What the last three months of data have done is widen the confidence bands back out. There’s considerable … uncertainty about what the next few months of inflation will be,” Daly said during an interview for a podcast taped on Thursday at George Mason University’s Mercatus Center. “We’ve had three stubborn months of data, but I still see monetary policy is working … I do think that we’re seeing, in a really positive way, disinflation.”
Daly did not say if she felt the U.S. central bank was likely or not to cut interest rates this year. Even though investors have keyed on rate cuts beginning in September, policymakers, stung by inflation that ran hotter than expected for the first months of the year, have been reluctant to put a time frame around any policy easing.
“I’m in a wait-and-see mode,” Daly said, noting “different signals” coming from companies that say they are losing pricing power as consumers become more selective, but also are not seeing input prices slow.
Daly said she is instead thinking about how incoming data is feeding one of several different economic scenarios that could play out, and how policy might need to react in response.
So far, for example, she said that while job growth may be softening, there was no evidence that the labor market was faltering in a way that might warrant rate cuts.
Even though the gain of 175,000 jobs in April was below what has been common in the years since the COVID-19 pandemic, it remains well above what is needed to account for population growth and to keep the unemployment rate roughly steady.
“In a scenario where inflation stays … level, just doesn’t make much further progress, then it’s not appropriate to start adjusting the rate unless we see the labor market faltering, which it’s not showing any signs of doing,” she said.
Given still strong monthly job gains, “a softening labor market right now would just be getting back to what we think is normal growth,” of perhaps 110,000 to 120,000 monthly new payroll positions, Daly said.
A voting member of the central bank’s policy-setting Federal Open Market Committee this year, Daly supported the Fed’s decision last week to keep its benchmark interest rate in the current 5.25%-5.50% range.
The podcast is scheduled to be posted online on Monday.
