By Ann Saphir
(Reuters) -San Francisco Federal Reserve Bank President Mary Daly on Tuesday said it will be mid-2022 before there is clarity on the true state of the labor market and the outlook for inflation, urging policy patience in the meantime.
"It's going to take time to know" whether the job market is tight, as many employers say, or has room to expand by bringing people back into the workforce, Daly told a National Association of Business Economists virtual meeting.
With the great amount of uncertainty around the state of the labor market, and with COVID-19 still the main culprit behind the ongoing surge in inflation, the best thing to do for now is to stay "steady in the boat" and vigilant, she said.
While it is her expectation that when the pandemic fades, inflation will as well, there is a lot of uncertainty.
"Let's be patient" and wait to see if inflation fades when the pandemic does, as she expects, she said, adding supply chain disruptions may keep prices elevated until well into next year.
"I'm looking at the summer of 2022 is when we should - knock on wood, no more variants, no more delta surges - get some clarity," she said. It will also take about six months to get clarity on the state of the labor market, she said.
In the meantime it could be a "challenging time" as consumers have to pay more for gas and food and other necessities, she said. If the Fed raises interest rates too soon, it will do very little to reduce prices but will "absolutely" reduce the pace of job gains.
"That's too much risk to take when we don't have any indication that these are today persistent trends," she said.