While there have been some positive signs in recent months that inflation is cooling, the Federal Reserve will "stay the course" and maintain a restrictive monetary policy, Vice Chairwoman Lael Brainard said Thursday.
"Inflation remains high, and policy is going to need to remain sufficiently restrictive for some time to make sure it gets down to 2% on a sustained basis," Ms. Brainard said during a speech at the University of Chicago Booth School of Business.
In its fight to tamp down inflation, the Fed has raised rates in its last seven meetings, including a 50-basis point hike at its most recent meeting in December. The 50-basis-point hike marked a slowdown for the Federal Open Market Committee; it had approved 75-basis-point increases in each of its previous four meetings.
The federal funds rate is now in a range of 4.25% to 4.5%.
Much like Fed Chairman Jerome H. Powell during a Jan. 10 speech in Sweden, Ms. Brainard did not comment on future rate hikes Thursday, but said she slowing the pace of rate hikes "gives us the ability to absorb more data and to, I think, navigate what's a very uncertain environment and probably land at a sufficiently restrictive level."
The committee's next meeting is Jan. 31-Feb. 1, when another rate increase is expected.
As of Thursday afternoon, according to CME Group's FedWatch tool, market participants' pricing of Fed fund futures indicated there is a 96.3% probability that the Fed will increase rates by 25 basis points at the next meeting.
Ms. Brainard said the economic indicators might provide some reassurance that the nation is not "currently experiencing a 1970s style wage-price spiral." She added, "It's possible that a continued moderation in output could facilitate continued easing in the labor market and reduction in inflation without a significant loss of employment."
The unemployment rate dropped to 3.5% in December and data from the Bureau of Labor Statistics on Jan. 12 showed the consumer price index rose 6.5% in December from a year earlier, down from 7.1% in November.
