UPDATE 1-Fed's Daly sees policy rate rising to least 5.1%, then a hold

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By Ann Saphir

Feb 3 (Reuters) - San Francisco Federal Reserve Bank President Mary Daly on Friday said the 5.1% policy rate that most Fed policymakers thought as of December would ultimately be needed is a "good indicator" for where policy is going, but the central bank could take rates even higher.

"I'm prepared to do more than that, if more is needed," Daly told Fox Business Network.

She spoke hours after the U.S. Labor Department earlier on Friday reported employers added more than a half million jobs in January, a "wow" number, Daly said, but in line with recent data showing labor market strength despite slowing in the overall economy.

The Fed earlier this week raised its benchmark rate a quarter of point, to 4.5% to 4.75%, and said it still expects "ongoing increases" will be needed to get policy tight enough to bring down high inflation.

Daly said she expects it will take longer than just this year to win the war on high inflation. As of December, inflation by the Fed's preferred gauge was 5%.

"We really will have to be in a restrictive stance of policy until we truly understand and believe that inflation will come squarely back down to our 2% target," she said, adding that Fed policymakers are "resolute and united" in doing so.

"I think it's far too early to declare victory and even think about peaking" in inflation, she said. "Right now the most important thing to convey to listeners is that the direction of policy is for additional tightening and in holding that restrictive stance for some time." (Reporting by Ann Saphir; Editing by Chris Reese and Jonathan Oatis)