Friday, January 21, 2022

UPDATE 1-Fed’s Brainard ready to raise rates ‘as soon as’ bond-buying taper ends

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Jan 13 () – Federal Reserve Governor Lael Brainard on Thursday said the US central bank would be in a position to start what could be several interest rate hikes this year “as soon as” it completes winding down its bond purchases, expected to happen in March.

“The (Fed’s policy-setting) committee has projected several hikes over the course of the year,” Brainard said in testimony before the Senate Banking Committee.

“Of course we will be in a position to do that I think as soon as our purchases are terminated, and we’ll simply have to see what the data requires over the course of the year, and you know we started to discuss shrinking our balance sheet, ”she said.

Brainard also said she expected the current wave of high inflation to persist through the next couple of quarters. Her remarks came in response to a senator’s question during her confirmation hearing here to be the Fed’s vice chair.

The Fed late last year began winding down its purchases of Treasuries and mortgage-backed bonds and is on track to end that process in March.

Minutes of the final Fed policy meeting of 2021 indicated officials were increasingly eager here to address an inflation rate that is running at more than twice its 2% flexible annualized target, and several Fed officials have since publicly advocated for rate hikes to start at the March 15-16 policy meeting. Brainard appeared to signal she is ready to act on rates promptly after the bond-buying taper is complete.

The Fed slashed its benchmark overnight interest rate to near zero in March 2020 and launched a large-scale asset purchase program as well to shield the economy from the body blow delivered by the onset of the pandemic coronavirus. On Tuesday, at his confirmation hearing before the same group of senators for a second term as Fed chief, Jerome Powell said the economy no longer requires here such extensive support. (Reporting by Dan Burns Editing by Paul Simao)

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