Lael Brainard, Vice Chairman of the US Federal Reserve, listens to questions during an interview in Washington, DC, USA, Monday, November 14, 2022.
Andrew Haller | Bloomberg | Bloomberg | Getty Images
Federal Reserve Vice Chairman Lael Brainard signaled on Monday that the central bank could slow the pace of rate hikes soon.
With the market likely to fall in December from the Fed’s rapid pace of rate hikes this year, Brainard confirmed that a slowdown, if not a halt, is imminent.
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“I think it will probably be appropriate soon to slow down the pace of rate hikes,” he said in a live interview with Bloomberg News.
This doesn’t mean the Fed will stop raising rates, but it will at least get them off the pace of four straight 0.75 percentage points gains.
“The important thing to stress is that we’ve done a lot, but more needs to be done, both by raising rates and keeping inflation under control, to bring inflation down to 2% over time,” Brainard said. There is,” he said.
Brainard made his remarks a week after the Federal Reserve raised its benchmark interest rate to its 3.75% to 4% target range, the highest in 14 years. According to the Bureau of Labor Statistics, the Fed is battling inflation at its highest level since the early 1980s and is still on pace at 7.7% annualized in October.
With the consumer price index up 0.4% last month, below the Dow Jones estimate of 0.6%, Brainard said he saw signs that inflation was coming down.
“We’ve raised interest rates very quickly … and we’ve been shrinking our balance sheet. In financial conditions you can see that in inflation expectations, which are very firmly anchored.” she said.
As interest rates rise, the Fed is reducing bond holdings on its balance sheet by up to $95 billion per month. Since that process, called “quantitative tightening,” began in his June, the Fed’s balance sheet has shrunk by more than $235 billion, to $8.73 trillion.
