Investing.com – San Francisco Federal Reserve President Mary Daly said Monday that U.S. monetary policy is in a “good place” as the central bank monitors inflation and labor market conditions.

In an interview with Bloomberg Television, Daly emphasized the need for policymakers to maintain vigilance on inflation while considering future rate decisions.

“We cannot take our eyes off inflation... while I’m looking for productivity gains and seeing if they’re going to continue, I’m also keeping my eye completely focused on inflation to make sure that it doesn’t pick up in a way that would suggest we need to do more or we need to hold longer,” Daly said.

She noted that the rate cut implemented so far has supported the labor market while maintaining downward pressure on inflation. Daly added that when examining inflation data closely, she doesn’t see rising inflation in services, housing, or inflation expectations.

Daly cautioned against holding interest rates too high for too long, stating, “We don’t want to make the mistake of holding on too long for rates only to find out we injured the economy.”

Regarding the labor market, Daly pointed out that slowing wage growth indicates a negative demand shock. She also commented that current asset valuations reflect higher productivity expectations, regardless of whether artificial intelligence proves to be transformative.

Daly dismissed concerns about monetary policy effectiveness, saying she doesn’t see evidence that monetary policy isn’t transmitting to the economy. She also noted that the Federal Open Market Committee (FOMC) is currently less divided than it has been historically.