By Ann Saphir

(Reuters) – With U.S. economic and labor market performance improving but the inflation rate too high, it’s “appropriate” that the Federal Reserve begin reducing policy accommodations next month, San Francisco Federal Reserve Bank President Mary Daly stated Wednesday.

After that first rate rise, Daly said in remarks prepared for delivery to the Los Angeles World Affairs Council & Town Hall, “the timing and magnitude of future funds rate and balance sheet adjustments will depend on how the economy and the data evolve.”

She said that she will be closely monitoring data such as the progress from pandemic COVID-19 into an endemic state, how fast disrupted supply chains heal, how quickly workers who were displaced by COVID-19 are able to return to work, and the decline in fiscal support which aided the recovery of the economy from the shutdowns.

Daly stated that “we will be closely watching all these developments” and would let data decide the best policy path.

Last year’s inflation by the Fed’s preferred gauge, personal consumption expenditures price index (PCE price index), was 5.75%. This is the highest rate in 40 years and over twice the Fed’s 2% target.

Daly’s statements stand out because they are less hawkish than those of her fellow Fed officials as the Fed gears up for what is widely anticipated to be several rate hikes.

Wednesday’s remarks provided one clue: Her confidence in Fed’s ability communicate inflation-fighting intents and shape inflation expectations, will stop an upward price spiral recurring as it did during the 1970s.

Americans are assured by greater transparency and a stronger commitment to reaching our goals that times of high unemployment or inflation will end soon.