(Reuters) -The fundamentals of the U.S. economy are moving to where an interest rate cut may be necessary, San Francisco Federal Reserve Bank President Mary Daly said on Friday, though she signaled a July rate cut would probably be too early.

"Unless we saw a faltering in the labor market that was meaningful and we thought it would be persistent then I would say the fall looks more appropriate to me," Daly said in an interview on CNBC.

At the same time, she said, what is a current softening of the labor market could easily turn into a weakening, "and we can't allow for that to happen because we're waiting for inflation to pop up just around the corner."