By Michael S. Derby 

San Francisco Fed President Mary Daly said Monday the likely path of the U.S. economy calls for more interest-rate rises.

The economy's current state is "very good," she said, adding that the Fed is doing well in achieving its job and inflation goals. "These conditions, with both of the Fed's goals essentially met, merit the gradual normalization of monetary policy," Ms. Daly said in the text of a speech to be presented in Idaho.

Ms. Daly, who took office in early October and participated in her first vote at last week's interest-rate-setting Federal Open Market Committee meeting last week, sees the outlook for interest rates as intertwined with how the economy performs.

"I view this gradualism as a process of iterated learning, guided by incoming data," she said, explaining "we take a policy action, wait, learn about the economy's response, and repeat," Ms. Daly said. "The FOMC is not on autopilot, with quarterly rate increases locked in. We're constantly looking at the data and adjusting the monetary policy path as needed in response," she said.

When the Fed met last week, it left its short-term interest-rate target range unchanged at between 2% and 2.25%. While it offered little new guidance about the outlook then, the Fed is broadly expected to boost rates again in December and to follow through with more increases next year. Fed officials say they are raising rates to help keep the economy in balance and moving forward at a time of strong job growth and inflation returning to desired levels after a long period of weakness.

In her comments since taking over the top job at the Federal Reserve Bank of San Francisco, after serving as its research director, Ms. Daly has indicated she is on board with her colleagues' outlook.

In her prepared remarks, Ms. Daly was upbeat about the economy, which has "significant underlying economic momentum," with boosts from stimulative government fiscal policies and global growth.

She said the job market is "booming," adding that recent unemployment numbers "strongly suggest that the labor market has reached or exceeded full employment."

The return of inflation to the Fed's 2% target is "very encouraging," she said. "I expect this modest up trend to continue, with inflation rising to just a bit above 2% over the next year or so," Ms. Daly said.

Write to Michael S. Derby at michael.derby@wsj.com

(END) Dow Jones Newswires

November 12, 2018 14:44 ET (19:44 GMT)

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