Fed: Slowing Rate Hikes Will Be Appropriate “Soon” — Lael Brainard

Fed Vice Chair Lael Brainard said Monday that it will soon be appropriate for the Federal Reserve to slow its rate hikes.

“I think there is very strong agreement among the committee members about the need to show determination,” Brainard said in an interview with Bloomberg in Washington.

“But we have, and I think this is really important, we have very full discussions among committee members…(about) how much restriction, for how long, what data do we look at…So I think there are healthy discussions and I think It’s going to be very important to have those different perspectives inform our policy deliberations.”

key statements

“Very attentive” to the possible contagion effects, to the risks derived from the coordinated tightening of the central banks.
Spillover effects can create real risks for some countries, including commodity importers and those with financing mismatches.
Retail margins are now high, several times the increase in average hourly earnings.
Retail margins are expected to fall and contribute to disinflation.
On ethics, the Fed has moved very quickly to put processes in place to detect potential problems earlier.
Attention to “broad and inclusive” employment is central to the work of the Fed.
Employment outcomes for different demographic groups are now similar to what they were before the pandemic.
The Fed’s mandate revolves around keeping inflation expectations anchored at 2%.
The Fed has shown “determination” to attack inflation, and will continue to do so.
He is not sure if early retirees will return to work or not.
“It would be great” to see a return of the workers, otherwise the demand will have to be contained.
By factoring in delays and the cumulative impact of policy, the Fed will be better able to see how its policy plays out.
At this time it is difficult to see exactly the trajectory of rates.
It is important to remember that real incomes as a whole have fallen during high inflation.
The Fed “has an inflation target of 2%” and that is what it intends to achieve with its policy.
The Fed will take balance considerations into account, but is focused on hitting the 2% target.
The Treasury yield curve is now above 1% in real terms.
A range of estimates around the lag of monetary policy, from many quarters to just 2 or 3.
Very strong agreement” among the committee members to show determination against inflation.
The Fed has “very full discussions” on policy, giving weight to different data points.
Monetary tightening has shown up in flattening or falling house prices.
Housing services in inflation will probably not peak until next year.

His comments follow those of the Fed’s Christopher Waller, who sent the dollar into a bid earlier in the week when he said Friday’s inflation report was “just data” and that markets were “way ahead of the game.” He added that they “will need to see a run of CPI reports to take their foot off the brake.”

The DXY is in an accumulation phase for the start of the week, according to the hourly chart above.