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Fed's Brainard says inflation fight will continue 'for as long as it needs to'

Howard Schneider

WASHINGTON (Reuters) – Federal Reserve Vice Chairman Lyle Brainard made the latest statement at the Fed on Wednesday that combating price pressures is its top priority.

“At some point,” Brainard said, the risks posed by Fed policy to growth will increase, and the central bank’s assessment “will become more two-sided in preparation,” Brainard said In a note to the Clearinghouse and Banking Policy Institute.

While the slowdown in inflation in July was “welcome,” Brainard said the Fed will take “months of Low monthly inflation data is needed to convince that inflation is falling back to 2%.

“Our resolve is firm,” she said. “If history is any guide, it is important to avoid the risk of a premature retreat” and ease interest rates until inflation is under control.

Brainard is the latest Fed official after Chairman Jerome Powell delivered a high-profile speech last month in a bid for the long-term fight 40, laying the groundwork for the worst inflation outbreak in years, noting the potential costs involved. She used the phrase “as long as it takes”, echoing past pledges by other central bankers to “do whatever it takes” to lift their economies from the crisis bail out – apply the same promise to lower prices.

Brainard noted that growth is slowing, but the Fed still needs to ensure inflation is under control.

The U.S. labor market means job losses are likely to be more limited than past slowdowns, with businesses tending to retain hard-to-find workers rather than resort to layoffs.

“This could mean lower aggregate demand A slowdown would result in a smaller increase in unemployment than we’ve seen in previous recessions,” she said. “But it’s too early to draw any firm conclusions. ”

The next Fed meeting will be held in September 20- 21 , and is expected to approve another rate hike of one-half or three-quarter percentage points.

Brainard doesn’t seem inclined to either point in her prepared remarks, saying only that the Policy will “shift to an appropriately restrictive stance.” Traders in contracts tied to the federal funds rate expect larger gains.




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