San Francisco Fed's Mary Daly says more rate hikes are likely, but timing is still up in the air

What Daly said and where she said it

Mary Daly told CNBC's Steve Liesman in a live interview that policy will likely need to get tighter, but the amount and timing will depend on incoming data. "My expectation is we're going to have to tighten policy further. Exactly when and how much is still to be decided because we just have to take all the variables that are coming in," she said, adding, "More is likely to be needed, and certainly ... I'm prepared to do that if that's what the economy calls for."

She said she is not broadly worried about growth but is focused on inflation sticking around. Daly summed up the tradeoff this way: "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," noting "This has been high for too long, almost six years, and we're really starting to feel the burden of that spread everywhere."

The data that matters

The Bureau of Labor Statistics reported that employers added 165,000 jobs in October and the jobless rate slipped to 4.1%. The surprise was sizable, with hiring beating Wall Street's view and coming in at close to three times the Dow Jones estimate. Daly called the report "good news for American workers," while pointing to the squeeze from prices.

She contrasted pay and prices, noting average hourly earnings rose 3.1% over the past year in October while the consumer price index registered 3.7% in September. "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 said. Her takeaway: strong hiring does not automatically mean workers are gaining ground after inflation.

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Where the Fed stands and what to watch

The Federal Open Market Committee raised the benchmark overnight rate by a quarter point in September to a target range of 3.75% to 4%. The committee chose not to add another increase last week, saying it would wait for "the accumulation of more information" before deciding its next step.

Daly will be a voter on the committee next year and still favors moving gradually. "I was really supportive and completely thought that that was the right move to move in September," she said, adding that it was also appropriate to pause at the latest meeting because "the world is filled with uncertainty." On Thursday, Richmond Fed President Thomas Barkin signaled that additional rate increases are probable, but he did not pin down when they might occur.

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