Lael Brainard predicts that the Fed will bring about a soft economic landing.

0 38

Lael Brainard, a Federal Reserve governor named as the new central bank vice-chair by President Biden, said the Fed will communicate clearly its plans to remove economic support — and suggested the job market will continue to grow, even if the Fed withdraws its aid and if inflation begins to decline.

Ms. Brainard was screened by the Senate Banking Committee on Tuesday. She answered questions about her qualifications, her views on the Fed’s role in preparing the financial system for climate change, and the outlook for the US economy.

At a hearing that was marked by a narrow stance — one that suggested that Ms. Brainard might enjoy some bipartisan support — the nominee expressed a willingness to fight high and rising prices by taking the Fed’s aid to the economy. . The central bank is already slowing down its bond-buying program, and it has indicated that it could soon raise interest rates and contract its assets to further cool the economy.

“I think we will see inflation return to target as the employment picture continues to clarify,” said Ms Brainard, after noting that the Fed would clearly communicate its plans to withdraw support. “There are some short-term restrictions there that I think are keeping people from returning to the job market. If those are lifted, I think we’ll make lasting gains.”

The unemployment rate has fallen sharply, but millions of workers are still missing from the job market compared to before the pandemic, and many employers are complaining that they cannot find workers, suggesting that health problems and other challenges are keeping many people on the sidelines for now. At the same time, price inflation is fast, with a report on Wednesday showing that a major price index rose in December at the fastest pace since 1982.

Ms. Brainard acknowledged that pandemic imbalances that have rocked global shipping and shut down factories are part of the current high inflation — and that Fed policy can do little to solve those supply problems. But she stressed that Fed policies affecting borrowing costs could have a significant impact on demand cooling.

“We have a range of tools – they are very effective – and we will use them to reduce inflation,” said Ms Brainard.

Fed officials have increasingly indicated that they expect to raise interest rates in 2022 to prevent the current high inflation from becoming a permanent economic feature. Markets increasingly expect four rate hikes in 2022, pushing the Fed’s short-term key rate just above 1 percent.

Leave A Reply

Your email address will not be published.