The Fed’s second-in-command reiterates to keep restrictive interest rates but hints that it may raise interest rates cautiously, beware of negative shock risks – yqqlm

Original title: The second-in-command of the Fed reiterated to maintain restrictive interest rates but hinted that it may raise interest rates cautiously and be alert to the risk of negative shocks

The Fed’s second-in-command and Fed vice-chairman Brainard reiterated that the Fed should maintain monetary tightening for a certain period of time, but showed a tendency to be cautious about raising interest rates, believing that the tight U.S. labor market has hope for a balance between supply and demand, saying The Fed will take into account the impact of policy spillovers.

On Monday, October 10, local time, Brainard pointed out in his speech that in an environment of high global uncertainty, the Fed’s previous interest rate hikes will take some time to have an effect on the economy and slow the economy.

“To inform us how to assess the path of the policy rate, a cautious and data-dependent approach will allow us to understand how economic activity, employment and inflation are adjusting to the accumulated tightening.”

“Monetary policy will be restrictive for a period of time, ensuring inflation falls back to target over time.”

Brainard said that so far, the Fed’s monetary tightening has actually only partially contributed to the slowdown in demand. In the housing market, the impact of tightening money was most pronounced. There is lag in other areas of the economy. She also said there were some tentative signs of a rebalancing of supply and demand in the labor market against the backdrop of slower economic output growth.

The media commented that it brought the possibility of the Fed to raise interest rates cautiously.

At the same time, in the later part of Monday’s speech, Brainard mentioned that many central banks in the world‘s largest economies have raised interest rates by 125 basis points or more in the past six months, and the 10-year interest rates of major economies in Canada, the United Kingdom, and the euro zone Treasury yields have climbed 190 basis points this year to 360 basis points. she says,

“The combined effect of a global joint tightening outweighs the partial tightening effect in one region. The Fed factored in higher interest rates, a stronger dollar, weaker demand from overseas economies spillovers into the U.S., and vice versa.” The Fed is “focused on the risk of further negative shocks,” such as the Russia-Ukraine conflict and the coronavirus outbreak.

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