U.S. Federal Reserve Vice Chairman Lael Brainard listens to a question during an interview in Washington, DC, U.S., Monday, November 14, 2022.
Andre Harrer | Bloomberg | Getty Images
Federal Reserve Vice Chairman Lael Brainard indicated on Monday that the central bank may soon slow the pace of its interest rate hikes.
With markets pricing in a likely decline in December from the Fed’s rapid pace of rate hikes this year, Brainard confirmed that a slowdown, if not a halt, is looming.
“I think it will probably be appropriate soon to move to a slower pace of rate increases,” she told Bloomberg News in a live interview.
That doesn’t mean the Fed will stop raising rates, but it will at least slow to a pace that has seen four consecutive increases of 0.75 percentage points, a pattern not seen since the central bank began using short-term rates to define monetary policy in 1990. .
“I think it’s really important to point out that we’ve done a lot, but we have additional work to do both to raise rates and maintain moderation to bring inflation down to 2% over time,” Brainard said.
Brainard spoke a week after the Fed cut its benchmark interest rate to a target range of 3.75% to 4%, the highest level in 14 years. The Fed is battling inflation at its highest level since the early 1980s and continued at an annual rate of 7.7% in October, according to the Bureau of Labor Statistics.
The consumer price index rose 0.4% last month, less than the Dow Jones estimate of 0.6%, and Brainard said he saw signs of slowing inflation.
“We’ve been raising rates very quickly…and we’ve been shrinking the balance sheet, and you can see that in financial conditions, you can see that in inflation expectations, which are pretty well anchored,” she said. .
Along with the rate hikes, the Fed has reduced bond holdings on its balance sheet at a maximum rate of $95 billion per month. Since this process, dubbed “quantitative tightening,” began in June, the Fed’s balance sheet has shrunk by more than $235 billion but remains at $8.73 trillion.