Fed vice chairman says ‘very difficult’ to pause interest rate hike in September

Calling high inflation the Federal Reserve’s “number one challenge” Vice President Lael Brainard said on Thursday he supported at least two more 0.50 percentage point rate hikes. interest rates, with more to come if price pressures do not cool.

“The market is pricing in 50 basis points (of interest rate hikes) potentially in June and July. From the data we have today, it seems like a reasonable path,” Brainard told CNBC.

“But if we don’t see the kind of slowdown in the monthly inflation readings, if we don’t see some of this really hot demand starting to cool off a little bit, then it might be appropriate to have another meeting where we proceed at the same pace.”

The US central bank has raised interest rates by a cumulative 0.75 percentage point this year, and most Fed officials support an interest rate hike by 0.50 point at each of its next two meetings.

Atlanta Fed President Raphael Bostic suggested that until September the Fed should take a break to assess the state of the economy before tightening monetary policy further.

Brainard said this is unlikely and indicated that the discussion will only center on the question of whether the increment will be 0.25 point or 0.50 point that month.

“Right now, it’s very difficult to see justification for a break,” he told CNBC. “We still have a lot of work to do to bring inflation down to our 2% target.”

Brainard is often seen as one of the more “dovish” members of the Fed — that is, more inclined to accommodative monetary policy in favor of economic growth.

But in his new role as Fed vice chairman, his comments are seen as reflecting the vision of the central bank’s leadership. Brainard was sworn in last month as Fed number two.

Fed members meet in mid-June, and this week is the last week they are free to speak publicly before the regular period of silence leading up to the FOMC meeting.

“We will certainly do whatever is necessary to bring inflation back down,” Brainard said on Thursday. “That’s our number one challenge right now. We are starting from a position of strength, the economy has a lot of momentum.”