Brainard’s Bang: Says It May Soon Be Appropriate To Move To Slower Pace Of Rate Hikes

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Brainard said that it may soon be appropriate to move to a slower pace of interest rate hikes, and that the Fed will likely continue to gradually raise rates over the next few years.

On Monday, Lael Brainard, the vice chair of the Federal Reserve, suggested that the central bank might soon slow the rate at which it raises interest rates.

Markets anticipate a likely slowdown from the Fed’s swift rate increases this year in December, and Brainard confirmed that a slowdown, if not a stop, is imminent.

In a live interview with Bloomberg News, she said, “I think it will probably be prudent shortly to switch to a slower pace of rate rises.”

The Fed won’t necessarily stop raising rates as a result, but it will slow down from its recent pace of four straight rises of 0.75 percentage points, which is unprecedented since the institution began using short-term rates to determine monetary policy in 1990.

In order to achieve inflation of 2% over time, Brainard stated, “I think what’s very essential to underline is that we’ve done a lot but we still have extra work to do on raising rates and continuing restraint.”

A week after the Fed raised its benchmark interest rate to its planned range of 3.75%-4%, the highest level in 14 years, Brainard gave her speech. According to the Bureau of Labor Statistics, the Fed has been combating inflation, which has been running at its highest level since the early 1980s and continuing at a 7.7% annual rate in October.

In contrast to the Dow Jones prediction of 0.6%, the consumer price index increased by 0.4% last month, and Brainard claimed she has noticed evidence that inflation is slowing down.

“We’ve been shrinking the balance sheet and raising rates quite quickly, and you can see that in financial conditions and in inflation expectations, which are fairly well-anchored,” she added.

The Fed has been lowering its bond holdings on its balance sheet at a maximum rate of $95 billion per month in addition to rate rises. The Federal Reserve’s balance sheet has shrunk by more than $235 billion since the so-called “quantitative tightening” process started in June, but it still stands at $8.73 trillion.

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