Federal Reserve Vice Chairman Lael Brainard on Thursday said she didn’t think the central bank should pause its planned series of interest rate hikes in September which are designed to combat the highest inflation in about forty years.
“It is very hard to see the case for a pause, we’ve still got a lot of work to do to get inflation down to our 2% target,” Brainard said, in an interview on CNBC.
Earlier Atlanta Fed Raphael Bostic, in an exclusive MarketWatch interview, said a pause in September might make sense to give the Fed time to assess how the economy was reacting to the series of rate hikes this year.
With inflation running at 40-year highs, the Fed has launched a program to steadily raise its benchmark interest rate.
Brainard endorsed the Fed’s plan to raise its benchmark interest rate by a half-percentage point at both its June and July meetings. That would put the Fed’s policy rate in a range of 1.75%-2%.
Investors see the Fed raising its policy rate to 3% by the end of the year, according to the CME Group’s FedWatch tool that uses Fed fund futures pricing data.
Asked what she thought about the Fed’s meeting in September, Brainard replied it was very hard to know, and pointed out that there would be a slew of economic reports over the next three months.
“I don’t have a really clear sense of where we’ll be in September,” she said.
If there is not a deceleration in inflation and a cooling of demand, then the Fed may stay at the half percentage point rate hike pace.
If there is a deceleration in inflation and demand, then a quarter-point hike might be the best course, she added.
Brainard, a leading dove on the central bank, was confirmed by the Senate to a four-year term to the No. 2 post at the central bank. In her new role, Fed watchers believe she will speak for Fed Chairman Jerome Powell’s leadership team.
U.S. stocks moved lower DJIA, +0.08% SPX, +0.49% Thursday after Microsoft cut its guidance due to the strong dollar. The yield on the 10-year Treasury note TMUBMUSD10Y, 2.907% moved down slightly to 2.922% in choppy trading.