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Federal Reserve Governor Lael Brainard said tackling inflation and getting it back down to 2% while sustaining an inclusive recovery is the U.S. central bank’s most pressing task.
“Inflation is too high, and working people around the country are concerned about how far their paychecks will go,” Brainard said in remarks prepared for a confirmation hearing before the Senate Banking Committee. “Our monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone. This is our most important task.” The hearing will be held at 10 a.m. in Washington on Thursday.
Brainard was nominated by President Joe Biden to serve as Fed vice chair, succeeding Richard Clarida who resigned this month, two weeks before the end of his term in the wake of new questions about his personal trading.
If confirmed by the Senate, Brainard will be Chair Jerome Powell’s closest team member on monetary policy and strategy alongside New York Fed President John Williams. Her appearance before the Senate panel will mark the first time in a while that investors have heard from Brainard. Her last speech on the economic outlook was in September.
Brainard talked about her deep experience with financial crises over three decades that included stints at the U.S. Treasury as well as the White House, and she told senators that she is “committed to the independent and nonpartisan status of the Federal Reserve.”
“I will bring a considered and independent voice to our deliberations, drawing on insights from working people, businesses, financial institutions, and communities — large and small — across the country,” she said. “I will support policies that are in the interests of the American people and based on the law and careful analysis of the evidence.”
U.S. central bankers signaled last month they will raise the benchmark lending rate at least three times this year and announced an end to their asset-purchase program in mid-March.
Their pivot to dialing back pandemic policy support was in response to the strong U.S. labor market, booming growth and consumer prices that rose 7% in 2021, the biggest gain since 1982, when Paul Volcker was Fed chair.
Powell told lawmakers Tuesday that he expected the Fed to begin shrinking its $8.77 trillion balance sheet later this year.
Returning the balance sheet and interest rates to more normal levels will be tricky. Fed officials don’t really know how balance-sheet shrinkage will impact the economy or financial markets. The effect of the omicron coronavirus variant on activity is also a significant question in the forecast.
Brainard is the longest-serving Fed governor after Powell. She has been an influential member of the board and is co-author of changes to the Fed’s policy framework that described maximum employment as a “broad-based and inclusive goal.”
The adoption of that language was an important shift away from basing policy solely on the unemployment rate to gauge labor-market strength, which in the past has seen the Fed raise rates before the benefits of a tight job market have reached minority communities.
(Updates with more details from seventh paragraph.)
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