Daly: Jobs report welcome, inflation remains number one priority

In an appearance on CNBC, Federal Reserve official Mary Daly discussed the latest jobs figures, wage trends, and inflation.

• The jobs data represented positive news.

• Wage gains are not surging.

• Real earnings are dropping.

• She is optimistic about the U.S. labor force.

• She would like more confidence on inflation.

• Inflation has been too high for too long.

• Fighting inflation must be the top priority.

• A sturdy job market gives the Fed leeway to tackle inflation. The recent rate increase was correct, and holding rates at the last meeting was also appropriate.

• Uncertainty from tariffs, war, and AI exists, but inflation has proved stickier than desired.

• Further policy tightening will be needed.

• She stands ready to lift rates if required.

• The Fed should be deliberate in its actions.

• More information is needed to determine the amount and timing of additional tightening.

• The AI market adjustment must be orderly.

• There is considerable dedication to AI investments.

• If the volatility is indicating weaker demand, growth may slow a bit.

• She is not troubled by a substantial growth slowdown.

• Companies want lower inflation.

• Businesses are cautiously positive on the outlook.

• Full employment appears to be fairly stable.

• When he steps away from disruptive volatility, that is the sort of rebalancing one would hope for.

Assessment.

Daly's tone was hawkish. She considers inflation her leading concern, and a solid labor market gives the Fed room to reduce it. She welcomed the employment data and sees near-full employment, but noted that wage growth is not surging and real pay is falling. That distinction is important. The job market can hold up even as inflation diminishes workers' buying power.

On rates, Daly said the hike was proper and that pausing at the last meeting was also sensible. She foresees additional tightening and is ready to raise rates if necessary, but wants more data before deciding on timing and magnitude. For traders, the employment report gives the Fed flexibility. The inflation numbers will determine when that flexibility is used.

On AI, Daly sees large investment commitments and wants an orderly transition in that sector. If the volatility signals weaker demand, she sees room for growth to moderate slightly. Her overall view is that businesses are guardedly optimistic, employment is stable, and the economy is undergoing a rebalancing process she would expect. This leaves persistent inflation as the main policy worry.

Daly is a voting FOMC member in 2027.