(Reuters) - San Francisco Federal Reserve Bank President Mary Daly on Friday said inflation data published earlier in the day confirms her decreased confidence in her baseline expectation that two interest rate cuts this year are a "reasonable" projection.

Government data on Friday showed underlying inflation rose 0.4% in February - the most in more than a year - and a survey from the University of Michigan showed consumer inflation expectations rose.

"One hundred percent of my focus is on what's happening with inflation," Daly told Reuters on Friday in a follow-up call from an interview on Thursday. "The progress there hasn't been so decisive that I'm comfortable starting any kind of rate path declines right now."

With monetary policy restrictive, she said, the most likely path for the economy is slowing growth, a cooler labor market, further progress on inflation - and, eventually, rate cuts. But the plateau on inflation progress also illustrates the rising risk that the economy veers from that benign path, she said.

While true stagflation - stalled economic growth paired with high inflation - is still an unlikely tail risk that business contacts do not expect, she said, she does see a bigger chance of other scenarios.

"Six months from now you could find that growth in the labor market has remained relatively solid, but inflation has just not come down as expected. And so that would mean that adjusting the rate path wouldn't be warranted because we still are fighting to get inflation towards our 2% goal," she said. 

On the other hand, she said, business and consumer sentiment "have gotten a little shaky of late; it could end up being that translates into changes in hiring plans, etcetera that could slow the economy more that we would like to see, and put it into a situation where there's more challenges and that would call for maybe a different posture."

(Reporting by Ann Saphir; Editing by Dan Burns and Anna Driver)