Financial Associated Press, October 11 (Editor Zhao Hao) On Monday (October 10) local time, Fed Vice Chairman Lael Brainard said that while stabilizing inflation and tightening the currency, the bank is closely monitoring the economy aspects of risk.
Like other Fed officials, she stressed the need for tighter monetary policy, reiterating her commitment to bringing inflation back to the central bank’s 2 percent goal, “it will take time for the cumulative effects of tighter monetary policy to play out in the economy.”
Since March this year, the Fed has raised interest rates by 300 basis points, the steepest rate hike since 1980. The latest resolution also shows that the bank may raise interest rates by 75 basis points in early November and 50 basis points in December, raising interest rates to around the 4.25%-4.50% level.
Unlike other officials, Brainard’s speech in Chicago today focused more on economic risks for the year ahead. To better align the supply side, high interest rates are dampening the demand side of the economy, she said.
In recent months, U.S. financial markets have been tightening rapidly and broadly, borrowing costs have also risen rapidly, and prices of stocks and other assets have fallen significantly, developments that could slow business investment, spending and hiring, she said.
A survey showed that job openings in the United States fell sharply by 1.1 million in August. Separate data showed that U.S. households may be saving less than previously estimated, which could keep consumption subdued in the coming months.
Brainard said the Fed will be very cautious and data-dependent in setting monetary policy, adjusting dynamically based on the immediate performance of the economy, employment and inflation.
In addition, Brainard also mentioned that due to the spillover effect of the Federal Reserve, many central banks around the world also raised interest rates sharply in September, triggering volatility in interest rates and exchange rates, which may amplify risks in financial markets.
Since Brainard’s speech was skewed toward economic risks, the market thought it amounted to some “dovish” signals. During her speech, the three major U.S. stock indexes rebounded significantly, recovering some of the intraday losses.