Fed’s Lael Brainard won’t say if inflation has peaked, resists Sept. pause in rate hikes

Federal Reserve Vice Chairwoman Lael Brainard indicated Thursday that it was too early to say whether inflation has peaked — and said the central bank was likely to continue with its plans for aggressive interest rate hikes in the months ahead.

When asked whether prices have peaked, Brainard noted that she was watching for “consistent” data that the economy was cooling.

The Fed is tasked with taming inflation that has reached four-decade highs and pummeled US household budgets. The rate was at 8.3% in April after hitting 8.5% the previous month.

“On inflation, I’m going to be looking to see a consistent string of decelerating monthly prints on core inflation before I’m going to feel more confident that we’re getting to the kind of inflation trajectory that’s going to get us back to our 2% goal,” Brainard said during an appearance on CNBC.

The Fed is expected to hike interest rates by a larger-than-normal half-percentage point at its meetings in June and July – tightening monetary policy despite mounting concerns that efforts to cool inflation will push the country into recession.

While some officials, including Atlanta Fed President Raphael Bostic, have suggested the Fed could halt its planned rate hikes in September to assess the economic layout, Brainard argued that it was “very hard to see the case for a pause.”

“We’ve still got a lot of work to do to get inflation down to our 2% target,” said Brainard.

The vice chair noted she was looking for consistent data showing cooling demand and increased balance in the US labor market.

“We’re certainly going to do what is necessary to bring inflation back down. That’s our number one challenge right now,” she added.

Brainard’s remarks highlighted the extent of the challenge that she and Fed Chair Jerome Powell face in engineering a so-called “soft landing” for the economy.

She spoke to CNBC after JPMorgan Chase boss Jamie Dimon gave a pessimistic view of the situation, warning that the US faced a potential “economic hurricane” due to the dual impact of Fed policy tightening and the Russia-Ukraine war.

“That hurricane is right out there, down the road, coming our way,” Dimon said at a conference. “We just don’t know if it’s a minor one or Superstorm Sandy or Andrew or something like that. You better brace yourself.”

When asked about Dimon’s remarks, Brainard noted it was “certainly the case that there’s a fair amount of uncertainty.”

“We’ve had some pretty big shocks between Russia’s war on Ukraine and lockdowns associated with COVID in China,” she said. “But, what is clear is we need to get inflation down and I think there’s a path to do that whereby demand moderates, growth moderates, the labor market comes into better balance.”

Brainard expressed optimism that the Fed would succeed in its mission without upending the economy, noting that it was operating from a position of “economic strength.”

Critics have argued the Fed was too late to react while inflation took hold in the US economy. Powell and Treasury Secretary Janet Yellen were among the officials who initially dismissed inflation as “transitory” in nature and likely to resolve itself as COVID-19 supply chain bottlenecks eased.

Yellen, who has faced intense scrutiny over her response to the inflation crisis, admitted this week that her initial view was “wrong.”