Federal Reserve Vice Chair Lyle Brainard said: The central bank may soon slow down the pace of interest rate increases.
And with markets anticipating a potential downturn in December from the Fed’s rapid pace of rate hikes this year, Brainard emphasized that a slowdown, if not a halt, is on the horizon.
Brainard added in an interview with “Bloomberg” agency: “I think it will probably be appropriate in the near future to move to a slower pace of price increases,” according to what was seen by “Al Arabiya.net.”
This does not mean that the US Federal Reserve will stop raising interest rates, but at least it will deviate from a pace that has seen four consecutive increases of 0.75 percentage points, a pattern not seen since the central bank began using short-term interest rates to set monetary policy in 1990.
“I think what should really be emphasized is that we’ve done a lot, but we have additional work to do in terms of raising interest rates and maintaining restraint to get inflation down to 2% over time,” Brainard said.
Brainard’s comments come after the Fed recently raised its benchmark interest rate to a target range of 3.75%-4%, the highest level in 14 years.
The Fed was battling inflation at its highest level since the early 1980s and held at an annual pace of 7.7% in October, according to the Bureau of Labor Statistics.
The US Consumer Price Index rose 0.4% last month, less than the Dow Jones estimate of 0.6%.
Brainard said she saw signs of declining inflation.
“We’ve raised interest rates very quickly…we’ve reduced the balance sheet, and you can see that in financial conditions, you can see that in inflation expectations, which are well entrenched,” she said.
Besides raising interest rates, the Fed has been reducing bond holdings on its balance sheet at a maximum pace of $95 billion per month.
Since that process, called “quantitative tightening,” began in June, the Fed’s balance sheet has shrunk by more than $235 billion, but remains at $8.73 trillion.