Highlights of Fed’s Brainard Q&A: Emphasizes Fed’s Anti-Inflation Efforts

WASHINGTON (MaceNews) – The following are highlights of Thursday’s testimony of Federal Reserve Gov. Lael Brainard as noted by Mace News’ Steven K. Beckner:

Fed Governor Lael Brainard was quite assertive about fighting inflation in testimony before a Senate Banking Committee hearing on her confirmation to succeed Richard Clarida as Fed Vice Chairman.

First, she said the Fed’s single, most important tool for fighting inflation is the federal funds rate and said: “We do have powerful tool, and we are going to use to it to bring inflation down over time.”

Later, she seemed to strongly suggest that funds rate hikes will come immediately upon the end of asset purchases, i.e. in March.

“We’re very concerned about the high level of inflation,” she said. “We are committed at the Federal Reserve to bringing it back down to target. We’re taking a number of actions. We’ve already decided to end asset purchases in the first quarter. … (The) Committee has projected several hikes over the course of the year… We will be in a position to do that as soon as asset purchases are terminated.. We will simply have to see what the data requires over the course of the year.”

She was non-committal on the start of balance sheet shrinkage, simply saying, “We are starting to discuss shrinking our balance sheet… .”

Although inflation is projected to “remain high through the first two quarters,” she said it is projected to be “closer to 2 ½ by the end of the year.” But she added, “we should all take these projections with a fair amount of caution.”

And she pledged, “We will obviously try to bring it down quickly as we can consistent with sustained recovery.”

In her final set of comments in this area, Brainard remained vague about the timing for stating to reduce the Fed’s bond portfolio.

She said the Fed “has a responsibility to bring (inflation) down” and is working in that direction. She noted “we have accelerated asset purchase tapering so be in a position” to hike the funds rate and, “We’ve also talked about having the balance sheet starting to shrink sometime thereafter. So we’re very focused on that.”

Contact this reporter: steve@macenews.com

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