Economic data since the U.S. central bank's last meeting in December have showed inflation continuing to wane, with consumer and producer prices, profits, and wages all growing more slowly, and major inflation drivers like rent hardwired to move down.
After last year's rapid rate increases, "now we're in an environment where we're balancing risks on both sides,"during an event at the University of Chicago's Booth School of Business, even as she avoided, as the Fed's second-ranking official, voicing an explicit policy preference for the upcoming meeting.
"Inflation is high, and it will take time and resolve to get it back down to 2%. We are determined to stay the course," Brainard said. Throughout last year, the Fed's rapid series of rate hikes were announced in a statement that also promised "ongoing increases" until rates were "sufficiently restrictive to return inflation to 2%."
"Given they are getting kind of close to where they are wanting to pause, they should indicate that," possibly with language pointing just to "further" increases rather than the more open-ended guidance for "ongoing" rate hikes, said Bill English, a former head of the Fed's monetary affairs division who is now a professor at the Yale School of Management.
"The history of inflation forecast errors in 2021/22 makes the Fed's reaction function more conservative and less likely to take wins on the inflation front at face value," said Edward Al-Hussainy, a rates analyst at Columbia Threadneedle, who termed the current phase of the Fed's tightening cycle as "the easy part."
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