Fed Vice Chairman Brainard: Monetary policy will need to be more restrictive for a while

Brainard made evaluations on monetary policy in his speech at the Chicago Booth School of Business.

Stating that the falling inflation in recent months is important for American households, businesses and consumers, Brainard said, “It takes time and determination to reduce high inflation to 2 percent again. We are determined in this.“

Brainard reminded that the Fed and other foreign central banks tightened their monetary policies last year.

Expressing that the industrial production data announced yesterday point to a weakening in the manufacturing sector, Brainard said that the expectations that the US growth will be below the potential in 2022 and 2023 also reflect the significant tightening in the monetary policy.

Brainard stated that in contrast to the slowdown in production growth, the labor market is in a tight situation throughout 2022, with layoffs below pre-Kovid-19 outbreak levels.

“We are determined to restore price stability”

Reminding that inflation has regressed from high levels in recent months, Brainard noted that this slowdown reflects war-related energy shocks and easing in core goods inflation.

Noting that despite these developments, uncertainty continues to a large extent, Brainard stated that other shocks related to the war and the epidemic may also be seen.

Stressing that the Fed is determined to restore price stability, Brainard said, “Despite the recent moderation, inflation remains high and monetary policy will need to be ‘restrictive enough’ for a while to ensure that inflation returns to 2 percent in a sustainable way.”