San Francisco Fed’s Daly says jobs report complicates interest rate call

San Francisco Federal Reserve President Mary Daly said Friday the weak February jobs report adds to a difficult policymaking environment.

In a CNBC interview, Daly did not commit to a position on interest rates, but said a softening labor market combined with inflation still running above the central bank’s 2% target complicate future decisions.

“This jobs market report has got my attention,” she said during a “Squawk Box” interview. “I don’t think you can look through this report, but I also don’t think you should make more of it than one month of data.”

The Bureau of Labor Statistics on Friday reported that nonfarm payrolls declined by 92,000 in February, against expectations for a gain of 50,000 and third jobs decrease in the past five months.

With concerns rising about the labor market, the Fed cut its benchmark interest rate three times in the latter part of 2025 and has taken a more cautious approach since then with inflation still above target and threatened by the Iran war.

“It’s a very different universe than when we have inflation below our target,” said Daly, referencing the cuts in 2019 when prices were tame. “But right now we have inflation printing above target. It’s been printing above target for some time, so it’s really a balance of risks calculation, and I hope the 75 basis points we did last year would put a floor underneath the labor market.”

Following the report, futures traders raised odds for rate cuts, pulling forward the next one to July and raising the probability for two reductions by the end of the year.

“I think the important thing is that it’s really hard to hike right now in a world where … we don’t have any evidence that [the labor market is] quite steady. So I think we just need more time,” she said.

Daly does not get a vote this year on the rate-setting Federal Open Market Committee but will vote again in 2027.