Lael Brainard, Nominee for Fed Vice Chair, Calls Inflation ‘Too High’

Lael Brainard, Nominee for Fed Vice Chair, Calls Inflation ‘Too High’
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Lyle Brainard, the Federal Reserve governor nominated by President Biden to be the new central bank vice president, told lawmakers that the central bank will use its policies to fight inflation under control in comments prepared for Thursday’s stabilization session.

Ms Brainard, who faces scrutiny before the Senate Banking Committee, is likely to garner significant support among Democrats and could garner some Republican votes, though the number of votes is unclear at this point.

Her nomination — and her new role at the Federal Reserve if confirmed by the Senate — comes at a difficult economic moment. Although the unemployment rate has fallen rapidly, inflation has taken off, with a report on Wednesday showing that a key price index rose in December at the fastest pace since 1982.

“We are seeing the strongest rebound in growth and decline in unemployment of any in the past five decades,” said Ms Brainard. “But inflation is very high, and workers across the country are concerned about how far their salaries will go.”

Ms Brainard also told lawmakers that the Fed’s policies are “focused on bringing inflation back to 2 per cent while maintaining an inclusive recovery”, calling it “the central bank’s most important task”.

After nearly two years of supporting the virus-stricken economy by keeping interest rates at rock bottom and buying government-backed debt, Fed officials began slowing their purchases of big bonds late last year. This program is on course to end in March. Officials have indicated in recent weeks that they also expect to raise interest rates to make borrowing more expensive, slowing demand and helping cool the economy.

Markets are increasingly anticipating four rate hikes in 2022, which would put the Fed’s short-term policy rate just above 1%.

“The economy today is making welcome progress, but the pandemic continues to pose challenges,” Ms Brainard said. “Our priority is to protect the gains we’ve made and support a full recovery.”

Ms. Brainard has served on the Federal Reserve since 2014, including in the Obama, Trump and Biden administrations. Prior to that, she was a senior international official at the Treasury Department. As an economist and Democrat, she was seen as a potential contender for the position of Treasury Secretary or Fed Chair during the Biden administration.

She has a good working relationship with Jerome H. Powell, the Federal Reserve chair, whom Mr. Biden re-nominated for a second term. She used her prepared statement to stress that she has worked with many administrations in Washington – Democrats and Republicans alike – while pledging to take seriously the Fed’s mission to combat inflation and its independence from partisan differences.

“I will bring a thoughtful and independent voice into our deliberations,” she said.

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