Aug 5 (Reuters) - Federal Reserve Bank of San Francisco President Mary Daly said on Wednesday she was "completely supportive" of the decision last week to hold interest rates steady as the central bank gathers more data about how it should respond to inflation that is well above its 2% target.

"We have a lot of information we need to collect" before the September monetary policy meeting to determine whether inflation is being driven by supply shocks that will wane over time, or whether a longer-lasting inflation situation is forming, Daly said in an appearance before an economics conference in Tokyo. 

The Fed should be "vigilant to watch the information as it comes in, but be very prepared to take action" if needed, Daly said.

When the interest rate setting Federal Open Market Committee met last week it voted in favor of holding its interest rate target steady at between 3.5% and 3.75% amid ongoing worries about the state of price pressures.

Three officials dissented in favor of rate hikes due to the high level of inflation, and over recent days, other Fed officials have argued the Fed needs to be open to rate hikes, or should boost short-term borrowing costs to bring price pressures back to 2%.

Daly is not currently a voting member of the FOMC. She said in her remarks she's worried about how the public might respond to another chapter of renewed inflation and noted that if it looked like inflation momentum was again building, the Fed might need to respond aggressively to get price pressures back to the target.

Daly said there are "good reasons" to believe that the supply-driven shocks that have hit the U.S. economy will not have a lasting impact on inflation.

Daly said businesses now have limited pricing power and will struggle to pass on higher input costs. Meanwhile, consumers are very focused on oil prices when thinking about inflation and an end to the Middle East war should fade that factor's contribution to price pressure.