San Francisco Federal Reserve President Mary Daly said Friday that a disappointing February jobs report is adding uncertainty to the central bank’s interest-rate outlook as policymakers weigh signs of a cooling labor market against inflation that remains above target, CNBC reports.

Speaking in a CNBC interview, Daly stopped short of signaling where rates may go next but said the latest employment data underscores the difficult environment facing the Federal Reserve.

“This jobs market report has got my attention,” Daly said. “I don’t think you can look through this report, but I also don’t think you should make more of it than one month of data.”

The Labor Department reported Friday that nonfarm payrolls fell by 92,000 in February, defying expectations for a gain of about 50,000 and marking the third monthly decline in jobs over the past five months.

The report intensified concerns that the labor market could be losing momentum after years of strong growth.

Daly said the data point adds another layer of complexity for policymakers, who are trying to balance signs of labor-market softening with inflation that remains above the Federal Reserve’s 2% target.

“It’s a very different universe than when we have inflation below our target,” Daly said, referring to the Fed’s rate cuts in 2019 when price pressures were subdued.

“But right now we have inflation printing above target,” Daly continued. “It’s been printing above target for some time, so it’s really a balance of risks calculation, and I hope the 75 basis points we did last year would put a floor underneath the labor market.”

The Fed cut its benchmark interest rate three times during the latter part of 2025 as concerns about economic growth increased.

Since then, officials have taken a more cautious stance as inflation has remained stubbornly elevated and new geopolitical tensions — including the war involving Iran — have raised concerns about energy prices and broader inflation pressures.

Financial markets reacted quickly to Friday’s jobs report. Futures traders increased expectations that the Fed will resume cutting interest rates later this year, with markets now pricing in the possibility of the first reduction by July and at least two rate cuts before the end of 2026.

Still, Daly emphasized that policymakers are not rushing to conclusions based on a single data point.

“I think the important thing is that it’s really hard to hike right now in a world where ... we don’t have any evidence that [the labor market is] quite steady. So I think we just need more time,” she said.

The Federal Reserve has repeatedly stressed that its policy decisions depend heavily on incoming economic data.

With inflation still above target and the labor market showing signs of potential weakness, officials face a delicate balancing act in determining whether to ease policy further or maintain current rates.

Daly does not vote this year on the rate-setting Federal Open Market Committee, though she will return as a voting member in 2027.

Even without a vote, her views carry weight as the central bank evaluates the trajectory of inflation, employment and economic growth.