Fed continues to “probe” the necessary level of rates to control inflation

The US Federal Reserve is still “probing” the right level of interest rates to control inflation, Fed Vice Chair Lael Brainard said on Thursday, noting the reason for a slower pace of rate increases is to create a balance of risks in the economy.

“We are looking for the sufficiently restrictive levelBrainard said. “We are now in an environment where we are balancing the risks on both sideshe declared.

Brainard added that the “logic“used by the Fed to move to smaller rate hikes at its December meeting”It is very applicable to today.”.

The data aligns

Signs of a “soft landing” for the US economy, implying a slowdown in inflation without major job losses, appear to be growing, Federal Reserve Vice Chair Lael Brainard said on Thursday.

“Inflation has been declining in recent months against a background of moderate growthBrainard said in remarks prepared for a speech, pointing to a “significant weakening of the manufacturing sector” and a moderation of consumer spending.

In addition, Brainard said the full impact of the Fed’s aggressive rate hikes last year has yet to be felt. The central bank raised its overnight benchmark rate by 4.25 percentage points in 2022, to the current range of 4.25%-4.50%, to tackle the highest inflation in four decades.

“The full effect on demand, employment and inflation of the cumulative tightening that is underway is likely to be yet to come.Brainard said in remarks for a speech at the University of Chicago Booth School of Business.

At the same time, Brainard argued that trends in prices, wages and margins that indicate inflation – which by the Fed’s preferred measure is nearly triple its 2% target – are slowing.

The unemployment rate in the United States, for its part, is below 3.5%.

Source: Reuters