Federal Reserve official says pause in rate hikes unlikely

Lael Brainard, the Federal Reserve’s vice chairwoman, suggested Thursday that the central bank might make another large rate increase into September and threw cold water on the idea that policymakers might pause rate moves after the summer — signaling instead that they are intently focused on controlling too-high inflation.

Brainard, in an interview on CNBC, said market expectations for half-percentage-point increases in June and July, increases that would be twice the size of the Fed’s typical ones, seemed “reasonable.” She does not know where the economy will be in September, she said, but explained that if inflation remained rapid, another big move “might well be appropriate.” If it slows, then a smaller pace of increase might make sense.

She added, however, that it was “hard to see the case for a pause” at a time when the Fed had “a lot of work to do” to get inflation down to its goal, which is 2% on average over time.

Prices picked up by 6.3% on a headline basis and 4.9% on a core basis over the year through April.

Fed officials are fighting the fastest rate of inflation since the 1980s by lifting borrowing costs, which slows down consumer and business demand, helping to bring the economy back into balance. Central bankers began to shrink their balance sheet of bond holdings this week and have lifted their main policy interest rate by 0.75 percentage points since March, efforts that are making mortgages and other loans pricier.

“We do expect to see some cooling of a very, very strong economy over time,” Brainard said, explaining that the Fed is looking for moderation and “better balance” in the labor market.

Brainard said she was looking for “a string of decelerating inflation data” to feel more confident that inflation would get back on a more sustainable path.