Sept 29 (Reuters) - San Francisco Federal Reserve Bank President Mary Daly on Wednesday said she feels the U.S. central bank will be able to begin reducing the pace of its monthly asset purchases by year end, but believes an interest rate hike is still a "long way" away. "By the end of the year, if things continue as I expect them to with the economy, then I would expect us to hit that "substantial further progress" goal, threshold, by later this year and it would be appropriate to start dialing back," she told reporters after a virtual talk at UCLA. The Fed has set a different, higher bar for raising interest rates, including reaching full employment and inflation at 2% and on track to stay durably above that level for some time. "If we should get there in the time frame of next year that would be a tremendous win for the economy," she said, but "I don’t expect that to be the case." Some 6 million Americans are still on the sidelines of the labor market, she said. Though inflation has stayed high longer than she had expected and upward pressures may not recede until well into next year, it"s "appropriate" to wait and see how things go.