OAKLAND, California (Reuters) -U.S. Federal Reserve policymakers could still cut interest rates twice this year as they projected in March, San Francisco Fed President Mary Daly said on Thursday, but for now rates should remain steady to make sure inflation is on track to reach the central bank's 2% goal.  

"As long as inflation is printing above target and there's some uncertainty about how quickly it can come back down to 2%, well, then inflation is going to be my focus because the labor market's in solid shape," Daly said in an interview with Reuters after an appearance at the Oakland Rotary Club. "We need to have policy in this modestly or moderately restrictive space, depending on how you think about it, to continue to bring ourselves to price stability."

The Fed earlier this month kept short-term borrowing costs in the 4.25%-4.5% range where they've been since December. Daly said the decision was an "active" choice as the central bank evaluates the economic impact of the Trump administration trade and other policies -- like a driver holding the wheel steady rather than steering to the left or the right.

Fed policymakers generally feel that Trump's aggressive tariffs risk increasing unemployment, which at 4.2% is comparatively low, and pushing up on inflation, which by the Fed's targeted measure is at 2.3%.

Overall, Daly said, the economy is in solid shape for now.

"I'm looking for any signs that the labor market is weakening. I haven't seen them, but let's continue to look," Daly said. "And I'm also looking for signs about inflation either continuing to gradually come down -- that would be welcome news -- or having any pressure to move either back up or stay sticky." 

As part of that effort she is crisscrossing the Western states for clues on how businesses and communities are faring. After her appearance in Oakland, Daly was headed to catch a plane to southern California where she was due to speak at another event on Friday.

"I spend a lot of time counting cranes in cities," she said. "And when I count the cranes, there's certainly more than zero. And there's, in many cities, especially in the Intermountain region, there are more than there were last year...they're not stalled out."

At the same time, she said, businesses are taking fewer risks - opening five stores, for instance, instead of 10. 

All that -- along with economic data showing a slowing but not cratering economy and a continued easing of inflation -- shows the Fed is not in the difficult position of having to choose between fighting inflation and bolstering the economy, and feeds into her sense that the Fed could cut rates later this year.

"In that world, a couple of rate cuts, like the (Fed projections) said, would make some sense, right? But the distribution of risks around that is pretty large," Daly said. Fed policy is well-positioned to respond to those risks and the central bank is agile, she added. 

A U.S. trade court ruling on Wednesday that blocked many of Trump's tariffs, followed on Thursday by an appeals court reversal, underscored the uncertainty over trade policy that is keeping many businesses -- and the Fed -- on edge.

Clarity might come with time, Daly said.

"I don't want to make policy decisions based on speculation, either speculation that inflation will rise or speculation that it will never fall," she said. "I think the (projection) in March is a reasonable projection, but ... we're in May, right? So many things can happen."