Fed's Brainard: Weak Inflation Argues for Caution on Further Rate Rises

Fed's Brainard: Weak Inflation Argues for Caution on Further Rate Rises”

Officials are laying out their arguments ahead of a policy meeting later this month after a period of relative quiet over the United States summer.

The US Central Bank would need to drive unemployment levels, already at a 4.4 percent level, to help boost inflation, Brainard said.

Recent data in the US convinced Morgan Stanley to lower its inflation outlook and thus decrease the number of rate hikes the broker expects from the Federal Reserve in 2018.

In a speech at the Economic Club of New York, Federal Reserve governor Lael Brainard said: "I am concerned that the recent low readings for inflation may be driven by depressed underlying inflation, which would imply a more persistent shortfall in inflation from our objective". In August, the U.S. economy created 156,000 jobs, but the unemployment rate rose slightly to 4.4% from 4.3% in July.

"As a result, following a rate hike in December, we now see the (Fed) raising rates three times in 2018 versus four previously", these experts said. "Both of those, if those really happened, could explain the low wage growth, the low inflation, and the seemingly tight labour market".

Brainard remained uneasy over inflation trends given that the inflation rate has consistently been below the target rate during the past 5 years. My own view is that we should be cautious about tightening policy further until we.

An influential policymaker has noted that the United States inflation rate is "well short of the target", and that the Federal reserve should only increase interest rates if the inflation rate rebounds, reported Reuters.

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