By Michael S. Derby

NEW YORK (Reuters) – Federal Reserve Bank of San Francisco President Mary Daly said on Tuesday that even with last month’s rate cut monetary policy is still working to bring inflation pressures down.

The half percentage point cut in the federal funds rate target implemented in September was a “right-sizing” of the stance of interest rate policy, “recognizing the progress we’ve made and loosening the policy reins a bit, but not letting go,” Daly said in the text of a speech prepared for an event at New York University.

Daly noted that “even with this adjustment, policy remains restrictive, exerting additional downward pressure on inflation to ensure it reaches 2%.”

While Daly did not say what she wants to see from monetary policy going forward, she said the Fed “must stay vigilant and be intentional,” working to deliver inflation at the target amid a job market defined by full employment.

Last month, the Fed lowered its target rate to between 4.75% and 5% in recognition of easing inflation pressures and rising risks to the job market, and penciled in around 50 basis points more worth of cuts into year end. But strong September hiring data showed more labor market vigor than most had expected, in turn calling into question the pace and size of future rate cuts.

In her remarks, Daly said “the economy is clearly in a better place,” with inflation pressures down by a lot, while the job market is now on a more sustainable path. She added, “the risks to our goals are now balanced.”

She said the current unemployment rate of 4.1% is around the long-run average and labor market conditions are now close to where they were before the pandemic started. Daly also said the job market “is no longer a major source of inflation pressures.”