(Reuters] – Mary Daly of San Francisco Federal Reserve Bank stated Thursday that there is no way to lower interest rates for March because of high inflation and a labor force that has taken a beating by almost every measure.

Daly stated that he did not want to place a stake in March and said so in an interview with Reuters.

But, she added, “lifting off in March when you have an unemployment rate of 3.9%, and an inflation rate that’s north of our price stability goal of average 2% inflation, to me seems a quite reasonable thing.”

The December increase in consumer prices of 7% compared to a year ago is reflected in a wider range of products and services, not just those related to the pandemic.

The unemployment rate has fallen to 3.9% now, which is lower than it was in the days before the pandemic.

She stated that “Lifting off, withdrawing some emergency accommodation we have offered to the economy is actually a proper thing to do” and it will sustain the recovery longer so that more workers can eventually return to the workforce.

Over the last week, a number of Fed policymakers suggested that March could see an increase in interest rates. The possibility is not as far-fetched as it was in November, when Daly urged patience regarding policy changes to let more workers return to work.

On Thursday she stated on Thursday that much has happened since then to make her more convinced of the need for policy adjustments in this year’s future.

“Back then I was hopeful that more labor supply response would be coming, but it hasn’t; and then we had Omicron which tells me it’s probably not going to come,” Daly said, because workers who were sidelined by childcare responsibilities or health concerns earlier in the pandemic continue to be so.

She also said that supply chain disruptions still exist and that she hears from business contacts that workers may be asking for higher wages to keep up with higher inflation.

She said that she now realizes we need to adjust our policy rate for this year. However, unlike many of her colleagues, she refused to give a number, other than to state she doesn’t believe there will be three rate increases.

She stated that even with rates hikes inflation will continue to be high throughout the year. However, it should fall as supply chains unclog and the new surge in COVID-19 slows down.

She said that once the Fed raises rates one or two times, the Fed should start shrinking its $8 trillion-plus balance sheet at an “predictable” pace that doesn’t fluctuate meeting to meeting but is faster than last time it trimmed its balance sheets.

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