(Reuters) - San Francisco Federal Reserve Bank President Mary Daly on Tuesday said that while there's no reason to be discouraged about the bumpy and sometimes imperceptible progress toward 2% inflation, the U.S. central bank should keep short-term borrowing costs where they are until the progress is more visible.

"Policy needs to remain restrictive until ... I see that we are really continuing to make progress on inflation," she told a community banking conference hosted by the American Bankers Association in Phoenix, Arizona.

"We want to be, in my judgment, careful ... before we make the next adjustment" to ensure there is enough downward pressure on inflation without short-changing the labor market.