Fed’s Brainard: Fed is committed to avoiding pulling back prematurely

Federal Reserve Vice Chair Lael Brainard reiterated on Friday that the monetary policy will need to be restrictive for some time to have confidence inflation is moving back to 2%, as reported by Reuters.

Additional takeaways

"Fed is committed to avoiding pulling back prematurely."

"Fed recognizes risks may become more two-sided at some point."

"Proceeding deliberately and in data-dependent manner will let Fed learn how economy and inflation are adjusting to tightening and update its assessment of policy rate needed."

"Uncertainty is currently high, there are range of estimates on peak fed funds rate."

"Policymakers taking risk-management posture to guard against risks of longer-term inflation expectations moving above target."

"Entire real yield curve will soon move into positive territory."

"Will take time for tighter financial conditions to fully impact different sectors and bring inflation down."

"As monetary policy tightens globally, important to consider how cross-border spillovers might impact financial vulnerabilities."

"Risk of additional inflationary shocks cannot be ruled out."

"There is risk that supply disruptions could be prolonged by Ukraine war, China's covid lockdowns or weather disruptions."

"Spillovers of monetary policy surprises between tightly linked advanced economies could be half the size of own-country effect on local currency bond yields."

Market reaction

The US Dollar Index clings to strong daily gains above 112.50 following these comments.

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