WASHINGTON—The vice chair of the Federal Reserve is indicating she wants to slow down the pace of rate increases being instituted by the Fed and in the process find the rate that will gradually bring inflation back to the Fed’s target of 2%.
In remarks to a research conference organized by the Federal Reserve Bank of New York, Lael Brainard said “it will take time for the full effect of tighter financial conditions to work through different sectors and to bring down inflation.”
The sharp increases in rates by the Fed have yet to stymie the pace of inflation in the U.S., but some analysts have suggested it must allow the previous tightening to take effect first.
Brainard told the meeting the Fed recognizes the risks may become more two-sided, signaling the Fed’s outlook on potential rate cuts as the economy weakens in the future.
Brainard indicated the Fed will continue to proceed in a “deliberate and data-dependent manner” to “learn how economic activity and inflation are adjusting to the cumulative tightening” and will adjust the rate that needs to be maintained to bring inflation back its target rate of 2%.
NAFCU Response
“Vice Chair Brainard’s comments provide a glimpse at how the doves are likely to begin to push back on the FOMC’s aggressively hawkish stance,” said NAFCU Vice President of Research and Chief Economist Curt Long. “Noting that risks will soon become two-sided suggests that rate cuts could be on the table by mid-2023 if inflation and employment levels recede next year as the FOMC is projecting.”
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