US Federal Reserve Vice Chairwoman Lael Brainard hinted Monday that the central bank may soon slow the pace of its rate hikes.
As markets anticipate a likely move lower on the back of the Fed’s rapid rate hikes this year, Brainard confirmed that a slowdown, if not a halt, is imminent.
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“I think it will probably be appropriate to move to a slower pace of rate hikes soon,” she told Bloomberg News in a live interview.
That doesn’t mean the Fed will stop raising rates, but it will at least lose a pace that has seen four consecutive hikes of 0.75 percentage points, an unprecedented pattern since the central bank began using short-term interest rates to set the rate in 1990 use monetary policy.
“I think what’s really important to emphasize is that we’ve done a lot, but we still have work to do, both on raising interest rates and maintaining restraint to keep inflation up over time.” 2%,” said Brainard.
Brainard spoke a week after the Fed raised interest rates to a target range of 3.75% to 4%, the highest level in 14 years. The Fed is battling inflation, which is at its highest since the early 1980s and is continuing at a 7.7% annual pace in October, according to the Bureau of Labor Statistics.
The CPI rose 0.4% last month, less than the Dow Jones estimate of 0.6%, and Brainard said she saw signs inflation was cooling.
“We raised rates very quickly … and we reduced the balance sheet, and you see that in financial conditions, you see that in inflation expectations, which are pretty well anchored,” she said.
Along with rate hikes, the Fed has reduced bond holdings on its balance sheet at a maximum rate of $95 billion per month. Since this process, dubbed “quantitative tightening,” began in June, the Fed’s balance sheet has shrunk by more than $235 billion but remains at $8.73 trillion.
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