Federal Reserve Vice Chair Lael Brainard spoke on:
- What Can We Learn from the Pandemic and the War about Supply Shocks, Inflation , and Monetary Policy?
Brainard warns:
- In addition, a protracted series of supply shocks associated with an extended period of high inflation—as with the pandemic and the war—risks pushing the inflation expectations of households and businesses above levels consistent with the central bank's long-run inflation objective.
- It is vital for monetary policy to keep inflation expectations anchored
- Even in the presence of pandemics and wars, central bankers have the responsibility to ensure that inflation expectations remain firmly anchored at levels consistent with our target.
And concludes, in part:
- A protracted series of adverse supply shocks could persistently weigh on potential output or could risk pushing inflation expectations above target in ways that call for monetary policy to tighten for risk-management reasons.
Reading between the lines its pretty clear that Brainard is in favour of continued rate hikes from the Fed to prevent deanchoring of inflation expectations.
Earlier from Fed officials on Monday:
- Fed's Williams sees signs of moderating inflation and supply chain improvements
- Fed's Williams: Inflation risks are still on the upside
- Fed's Bullard: Markets are under-pricing the risk the FOMC might be more aggressive
Full text of Brainard's speech is here if you are interested.
