Thursday, Federal Reserve Vice Chairwoman Lael Brainard said it was too soon to tell if inflation has reached its peak. She also said the central bank was likely to stick to its plans for aggressive interest rate hikes in the coming months.
When asked if prices have reached their peak, Brainard said she was keeping an eye out for “consistent” signs that the economy was slowing down.
The Fed’s job is to bring down inflation, which has hit highs not seen in four decades and hurt US household budgets. In April, the rate was 8.3 percent, down from 8.5 percent the month before.
“On inflation, I’ll want to see a consistent string of monthly declines in core inflation before I’ll feel more confident that we’re getting on an inflation path that will get us back to our 2 percent goal,” Brainard said during an appearance on CNBC.
At its meetings in June and July, the Fed is likely to raise interest rates by more than the usual half-percentage point. This will tighten monetary policy, even though there are growing worries that efforts to lower inflation will send the country into a recession.
Some officials, like the president of the Atlanta Fed, Raphael Bostic, have said that the Fed could stop its planned rate hikes in September to look at the economy, but Brainard said it was “very hard to see the case for a pause.”
Brainard said, “We still have a lot of work to do to get inflation down to our goal of 2%.”
The vice chair said that she was looking for consistent data showing that demand was falling and that the US labour market was becoming more balanced.
“We will definitely do what needs to be done to bring inflation back down. Right now, that’s our biggest problem,” she said.
Brainard’s comments showed how hard it will be for her and Fed Chair Jerome Powell to make sure the economy has a “soft landing.”
She talked to CNBC after Jamie Dimon, the head of JPMorgan Chase, gave a pessimistic view of the situation and warned that the US could face a “economic hurricane” because of the effects of the Fed’s tightening policy and the war between Russia and Ukraine.
At a conference, Dimon said, “That hurricane is right out there, down the road, and heading our way.” “We just don’t know if it’s a small one or if it’s going to be like Sandy or Andrew. You’d better get ready.”
When asked about Dimon’s comments, Brainard said, “There is definitely a fair amount of uncertainty.”
“Between Russia’s war on Ukraine and China’s COVID lockdowns, we’ve had some pretty big surprises,” she said. “But it’s clear that we need to lower inflation, and I think there’s a way to do that in which demand slows down, growth slows down, and the labour market becomes more balanced.”
Brainard was hopeful that the Fed would be able to do its job without upsetting the economy. He said that the Fed was working from a place of “economic strength.”
Critics have said that the Fed didn’t do enough to stop inflation in the US economy before it got out of hand. Powell and Janet Yellen, who is the secretary of the Treasury, were among the first people to say that inflation was “temporary” and likely to go away when COVID-19 supply chain bottlenecks were fixed.
Yellen has been closely watched because of how she handled the inflation crisis. This week, she said that her first opinion was “wrong.”