San Francisco Fed president warns American workers face a treadmill of high inflation as wages fail to keep pace
San Francisco Federal Reserve President Mary Daly said the central bank will likely need to raise interest rates further, warning that American workers remain trapped in what she called a “treadmill of high inflation” despite October’s jobs report outpacing Wall Street expectations.
The Bureau of Labor Statistics (BLS) reported the US economy added 165,000 jobs in October, nearly triple the Dow Jones consensus estimate, while the unemployment rate edged to 4.1%.
In a live CNBC interview, Daly separated the headline figures from the financial reality facing households.
“My expectation is we’re going to have to tighten policy further. Exactly when and how much is still to be decided because we just have to take all the variables that are coming in,” she said.
“More is likely to be needed, and certainly ... I’m prepared to do that if that’s what the economy calls for.”
Workers caught between jobs and income
Average hourly earnings rose 3.1% annually in October, below the latest consumer price index reading of 3.7% recorded in September. That means real wages are declining for much of the workforce even as job creation remains solid.
“They see that they can get jobs, they continue to spend. They’re not out of the game, but they are on a treadmill of high inflation,” Daly said.
“This has been high for too long, almost six years, and we’re really starting to feel the burden of that spread everywhere.”
The view aligns with that of Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA) in Washington, DC, who shared at the MBA’s annual convention in Chicago in October that “your typical household, their income is not keeping up with the cost of living. If you’re going to watch one macroeconomic variable, I’d recommend this one, because I think that personal saving rate captures the whole story pretty well.”
A powerful El Niño weather event could add as much as 1% to US consumer prices over the course of 2027, according to research from the Federal Reserve Bank of San Francisco. https://t.co/69yIoY9HOR
— Mortgage Professional America Magazine (@MPAMagazineUS) November 4, 2026
What the hold means for brokers
The Federal Open Market Committee (FOMC) raised its benchmark rate to a target range of 3.75%-4% at the September meeting, the first rate hike since 2023, before holding at the following gathering, citing a preference to wait for “the accumulation of more information.”
Daly, who will vote on the FOMC next year, acknowledged a volatile broader backdrop, including the “painful” but orderly repricing of technology stocks, as a reason for the Fed to remain deliberate.
“Those volatilities are something that you have to take into account, collect more information, and be deliberate but more gradual in how you get there,” she said.
For mortgage brokers navigating a compressed market, the Fed’s uncertain path extends the pressure.
The MBA projects two more rate hikes, one in December and another in the first quarter of 2027, with the 30-year mortgage rate expected to stay above 7% well into next year. Oxford Economics also backs a December Federal Reserve rate hike.
Richmond Fed President Thomas Barkin separately said he also expects higher rates, but offered no firm timeline.
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