Fed vice chair signals more interest rate increases ahead

Federal Reserve Vice Chair Lael Brainard said Wednesday that the central bank would need to see “several months” of low monthly inflation data to be convinced that rapid price growth was finally cooling, raising the odds that Fed leaders will again raise interest rates three-quarters of a percentage point when they meet this month.

“We are in this for as long as it takes to get inflation down,” Brainard said at an annual conference of the Clearing House and Bank Policy Institute.

Brainard repeatedly stressed the need for American consumers and businesses to believe the Fed is committed to bringing inflation down to its target rate of 2 percent after it touched a fourdecade high, above 9 percent, this summer. She said interest rates “will need to rise further” to sufficiently slow demand in the economy to help curb price growth.

Her comments echoed remarks by Fed Chair Jerome Powell, who said in a speech last month that the central bank was committed to restoring price stability, even if it came at a cost to businesses and consumers.

Brainard also suggested that corporate decision-making was partly to blame for rising prices. She said that high profit margins in some industries, including retailers and car dealers, suggested companies could be using market power to raise prices — and that reducing those markups “could make an important contribution to reduced inflation pressures in consumer goods.”

She noted several recent encouraging trends for prices, including falling gasoline prices; improved delivery times for some goods that had been snarled in global supply chains; and rising labor force participation, particularly among working-age women. She also noted that it was possible that current trends suggest the Fed could slow the economy without pushing up unemployment, as is typically the case, although she said it was too soon to tell.

Brainard warned that it would take time for the Fed’s efforts to work their way through the economy to reduce consumer demand and bring down inflation, which could eventually raise the risk of the Fed going too far. But, she said, “if history is any guide, it is important to avoid the risk of pulling back too soon.”