It's a summer Friday before a long weekend. Here's hoping you are able to duck out early.

Today, we have some highlights from our new interview with San Francisco Fed president Mary Daly, including why it's hard to get a sandwich at 2pm in the Bay Area, and those California inflation relief checks. πŸ₯ͺ

  • πŸ‘€ Situational awareness: On the opposite coast, Susan M. Collins started work today as president of the Boston Fed.
  • We'll be back Tuesday, following the July 4 holiday. πŸ‡ΊπŸ‡Έ

Today's newsletter, edited by Javier E. David, is 707 words, a 2Β½-minute read.

1 big thing: Mary Daly on the Fed's inflation war

Photo illustration: Shoshana Gordon/Axios. Photo:Β David Paul Morris/Bloomberg via Getty Images

Bringing inflation down is imperative to improve conditions for ordinary workers. That's a key theme we heard from our interview with San Francisco Fed president Mary Daly, conducted by video chat yesterday morning.

Why it matters: Daly has traditionally been one of the more dovish members of the Fed's policy committee. It makes her commitment to rate hikes and the war on inflation all the more notable.

  • She views taming prices as integral to helping disadvantaged workers.

Driving the news: Daly affirmed earlier comments that she expects to support another 0.75 percentage point interest rate increase later this month β€” even after a softer inflation reading released yesterday morning.

  • After the July decision, "then you figure out what else needs to be done so that we can get to 3.1% by the end of the year."

What she's saying: As recession fears swirl, Daly insists that the odds are higher "if we don't work to restore price stability."

  • "It is important to the long-run expansion of the economy and to the sustainable delivery of full employment. They're not trade-offs. They're a singular goal, and that's sustainable expansion that lives up to the potential of the U.S. economy."
  • "If you're way off your price stability goal, ultimately you unravel the ability to achieve full employment."
  • "The reason real wages are falling, despite a strong job market, is because inflation's too high and it's been high for too long," Daly tells Axios.
  • "So if we restore price stability and the unemployment rate goes up slightly ... that's a better economy because that's an economy where you can still find it fairly easy to get a job."

The current combination of low unemployment and high inflation is not good, she argues.

  • "This is not a recipe that's very comforting to workers, where they can get all the jobs they want, and they can even see their wage go up in nominal turns, but month after month, their real wages erode," she explains. "That's not a recipe for their happiness or their success."
  • "The remedy is to bring [the] inflation rate down so that the incomes they're earning today will pay for the goods and services tomorrow. And so that's why these things knit together so importantly."

Moreover, she sees signs of resilience in the economy and the labor market, even in the face of the Fed's tightening so far β€” most recently, in her quest to get lunch.

  • It "was about 2:00, and I went to three businesses right in a row, and they all have the same sign: 'Closing at 1:00 due to staffing shortages.'"
  • "There are staffing shortages because the labor market's so tight and people have opportunities and they ghost them … and that's not because they're bad people; that's because they've got lots of other opportunities and it's expensive to drive your car to work. So that's not a sustainable economy."

2. About those $1K checks to Californians

California residents, like the one shown here, pay more for gas than any other state. Photo: David Paul Morris/Bloomberg via Getty Images

We also asked Daly about a recent development in her home state: direct payments (dubbed "inflation relief checks") coming to some 23 million Californians.

Why it matters: Governments are proposing different mechanisms to try to offset the pinch consumers feel from rising costs, particularly gas prices. But the end result could prove counterproductive, as the relief could boost both demand and prices.

  • "It's a societal decision that fiscal agents have to take, which is: do we let people run pretty close to the end of their budget? Or do we give them a little relief and tolerate a little higher demand?" Daly says.

Driving the news: California, with a record-breaking surplus of $100 billion, will send out up to $1,050 β€” with the poorest residents getting the biggest chunk of cash.

  • "Because it's pretty isolated to California and it's more targeted towards low- and moderate-income communities, I don't think of it affecting aggregate inflation, but it is a demand support," Daly says.
  • "If you thought that inflation was going to erode purchasing power for these groups, now they have more money to fund themselves and their spending will be higher."

The bottom line: Daly says the job of a Fed official is to look at how moves like this scale up to the aggregate β€” and adjust policy accordingly.

More highlights from our interview here.