Federal Reserve Bank of San Francisco President Mary Daly said Monday the weaker-than-expected April jobs report is part of the expected volatility as the economy climbs out of the pandemic.

“We’re in a transition state. I see some momentum building. I’m very encouraged, I remain bullish about the future,” Daly told Yahoo Finance in an exclusive interview on Monday. “But we’re not there yet. And we’re going to have fits and starts and we have to stay steady in the boat.”

On Friday, the Bureau of Labor Statistics reported that the U.S. economy added only 266,000 jobs in April, well short of expectations for 1 million payroll adds.

Daly said the report reinforces the need for the central bank to remain patient on its easy money policies. Since the depths of the pandemic, the Fed has pinned short-term interest rates at near-zero and aggressively absorbed U.S. Treasuries and agency mortgage-backed securities.

“When you get a jobs report like you did and you see the volatility that we’ve had, you say ‘OK, we’re on a good path but we’re a long way from home,’” Daly said. “And when you’re a long way from home, it’s not yet time to start thinking about, thinking about, talking about relaxing the accommodations we’ve given.”

Daly is a voting member of this year’s Federal Open Market Committee (FOMC), which unanimously decided to keep its money printing policy unchanged on April 28.

The San Francisco Fed chief added that the April report underscores the unusual dynamics at play in the labor market, where workers in some cases are unable to return to jobs because of childcare or concerns over contracting the virus.

Daly said the extra unemployment insurance provided by the COVID relief bills may be discouraging workers from immediately returning to work, but pointed out that “there are many constraints” contributing to “a state of flux” in labor markets.

“I think we shouldn’t call it a shortage,” Daly said.

Time to taper?

With over 8 million people still out of work relative to pre-pandemic levels, Daly said she is not yet ready to have the conversation about pulling back on the central bank’s stimulative monetary policy.

Fed officials have made it clear that it would pull back on its asset purchases, or quantitative easing program, before it raises interest rates. The central bank is currently adding about $120 billion in assets a month to its ballooning balance sheet, which is approaching the $8 trillion mark.

But Fed Chairman Jerome Powell said on April 28 that it “will take some time” before the economy is at a place where the central bank will want to begin slowing those purchases.

Daly reiterated that it is “not yet” time to begin those discussions.

In the meantime, Daly said she was not concerned about easy money policies leading to a runaway in prices. She cautioned that inflation readings will rise due to “bottlenecks,” listing shipping costs and lumber shortages as examples of price pressures.

“That will cause inflation to pop in the next several months, probably through the end of the year, even achieving levels above 2%, but that’s going to be transitory in my judgment,” Daly said.

The Fed has said it will allow inflation, measured in core personal consumption expenditures, to run “moderately” above its 2% target.

But the Fed has reiterated that if inflationary pressures prove to be persistently high, it “would use our tools” to bring inflation back down. Daly said she is also watching financial instability issues, noting that stock market valuations appear “pretty high.”

The central bank’s next policy-setting meeting is scheduled to take place June 15 and 16.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

• Fed flags Archegos, meme stocks as examples of 'elevated' risk-taking

• Yellen: Higher interest rates may be needed to prevent economy from 'overheating'

• US needs to take leadership on central bank digital currencies: former CFTC chair

• Less-educated Asian Americans among hardest hit by job losses during pandemic

• A glossary of the Federal Reserve's full arsenal of 'bazookas'

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit