Lael Brainard comments:
- At some point in tightening cycle risks will become more two-sided
- We are in this for as long as it takes to get inflation down
- Monetary policy will need to be restrictive for some time
- Fed's policy rate will need to rise further
- Need 'several months of low monthly inflation readings' to be confident inflation is moving down to 2% (she's refering to core here)
- Our resolve is firm, goals clear and tools 'up to the task'
- Jobs market continues to exhibit considerable strength, which is hard to reconcile with more downbeat tone of activity
- A variety of indicators are showing signs of improvement on delivery times and supplies of some goods
- Notes that food inflation up 8.5% year-to-date and continuing to rise
- How long it takes to move inflation back down to 2 percent will depend on a combination of continued easing in supply constraints, slower demand growth, and lower markups, against the backdrop of anchored expectations
- A reduction in currently elevated margins could make an important contribution to reduced inflation pressures in consumer goods
- Full text
On the first read of the headlines, there was no real clue here on 50 vs 75 bps but after reading the speech, it's more dovish than it seems. There are some old 'team transitory' talking points in there and the argument that soft European and Chinese demand are disinflationary.
She also says this:
The rapidity of the tightening cycle and its global nature, as well as the uncertainty around the pace at which the effects of tighter financial conditions are working their way through aggregate demand, create risks associated with overtightening.
She also cited that the pace of QT double this month.
Brainard balances that by warning about the high costs of sustained inflation, including the talking point that virtually every central banker has been making:
"With a series of inflationary supply shocks, it is especially important to guard against the risk that households and businesses could start to expect inflation to remain above 2 percent in the longer run, which would make it much more challenging to bring inflation back down to our target."
Q&A now:
- Global tightening could potentially lower inflation pressure in the US
- Highly attentive to events abroad
- I'd like to see a clear regulator system around bitcoin