By Denny Gulino
KANSAS CITY (MaceNews) – Federal Reserve Gov. Lael Brainard, as the Dow industrials were plunging to a loss of more than 800 points Monday, reiterated that the Fed “is committed to sustaining the expansion” and that the market developments are bineg monitored closely for any implications for future policy.
Answering questions from Mace News following a speech announcing a new 24/7 real-time payment and settlement service under development called FedNow, Brainard said, “I’m certainly monitoring developments very closely.”
“I have said and others have as well that we’re committed to sustaining the expansion and I’m certainly monitoring developments for their implications for the outlook and I’ll continue to be very attentive to to them,” she said.
Sitting next to Brainard, Kansas City Fed President Esther George said, “This is exactly how policymakers approach it. Markets move quickly. It takes some time to see how that evolves so I think the best you can do right now is to monitor it.”
Answering another question from Mace News, Brainard conceded, “I think there are some features of the new normal that are different than we policymakers may have confronted over the 30 years prior to the crisis.”
The differences “include things like a very low equilibrium interest rate. That’s something you see around the world.” In addition, “Inflation seems to be a little bit soft relative to that two percent sustained goal that we’re trying to achieve in the underlying trend inflation.”
Finally, “inflation seems to be somewhat less sensitive to resource utilization than it had been in previous periods,” she said.
That’s why, she continued, the Fed is reexamining the policy framework it is using in the context of a “very clear mandate from Congress.” The Fed has been collecting opinions from communities around the country in its series of “Fed Listens” events and is looking are long term changes in its approach that might be becoming appropriate.
As stocks losses bounced above and below 3% the Treasury 10-year yield dropped to late 2016 lows, to 1.7%, deepening the 3-month to 10-year yield curve inversion that often prefigures recession months later.