Bloomberg News reports that Lael Brainard, the Vice Chair of the Federal Reserve, has said it is best to exercise caution as the central banks raise interest rates to curb high inflation. This caution is keeping in mind that the earlier hikes are still prevailing and working through the various sectors of the economy at a time when there is a high level of financial and global uncertainty.
While talking to the National Association for Business Economics, she said that by deliberately moving forward and a manner that is data dependent, it will allow everyone to learn how employment, economic activity, and inflation are factors that are trying hard to adjust to the cumulative effects of tightening for the assessments of the path of the policy rates are ascertained. She also said that for some time now monetary policy will prove to be restrictive, ensuring that inflation will return to the target figure over a period.
Central bankers in the US appear to be ready with their fourth straight 75 basis point hike in interest rates when they are scheduled to meet on November 1st and 2nd as they are trying to slow the economy and reduce inflation.
Brainard also noted concurrently the central banks across the globe are tightening, and the weaker demand overseas might spill back into the United States. She has also warned that lags in policy might impact the economy in the forthcoming months.
Bloomberg News reports that the Fed vice chair also expressed concerns last month, although most of her co-workers supported aggressive rate hikes instead of standing by her policy of exercising caution.
The forecast of the Fed officials related to rising rates to 4.4% by the year-end from the present target range of 3% to 3.25% and 4.6% in 2023 was updated last month as per projections.
She said that it is quite likely that the inflation might slow down provided the business markups were found retreating while also noticing at the same time that lasting shortages in labor may indicate that the slack in the job market does not appear as rapidly as it does in the earlier slowdowns.
The financial markets are also pricing in another 75 basis point rise in the lending rate with a benchmark rate that has followed a strong report of the job market for September that witnessed employers adding as many as 262,000 workers to the payrolls.
