Fed's Brainard: Fed Strongly Committed to Actions That Will Achieve Mandates -- Update
14 January 2021 - 05:55AM
Dow Jones News
By Michael S. Derby
Federal Reserve governor Lael Brainard said Wednesday the U.S.
central bank will continue to support the economy's recovery with
aggressive policy actions for some time to come.
"We are strongly committed to achieving our maximum-employment
and average inflation goals" and "it is too early to say how long
it will take" to do that, Ms. Brainard said in the text of a speech
prepared for a virtual appearance.
"The economy is far away from our goals in terms of both
employment and inflation, and even under an optimistic outlook, it
will take time to achieve substantial further progress" on getting
hiring and inflation back to desired levels, Ms. Brainard said.
Given that outlook, "I expect that the current pace of purchases
will remain appropriate for quite some time," she said, while
noting that central bank policy will adjust its actions based on
how the economy performs.
Ms. Brainard's remarks laid out her view on a key question now
facing central bankers. With the economy recovering and vaccines
coming on line to help put an end to the coronavirus pandemic, it
has raised questions about the outlook for monetary policy.
Right now, the Fed has its short-term target rate range at near
zero levels and has signaled it expects it to stay there for
several years to come. At the same time, the Fed is buying $120
billion a month in Treasury and mortgage bonds to keep long-term
borrowing rates low and to support smooth market functioning.
At the Fed's December meeting, officials said they would keep
going with bond buying until they had made significant progress in
achieving their job and inflation goals. Over recent days, a number
of Fed officials have offered their own outlooks for bond buying
amid a shared view that the recovery will pick up steam in the
later half of the year.
A number of Fed officials said there is too much uncertainty to
predict a pull back in bond buying. But on Friday, Fed Vice
Chairman Richard Clarida said in an appearance that he expects the
Fed to continue forward through 2021 at the current pace of bond
buying.
Ms. Brainard, in her speech, said much of what lies ahead
remains uncertain.
"The outlook will depend on the path of the virus and
vaccinations," she said. Cases of infection are on the rise, but
vaccines to combat this are also rolling out, which could lead to
better growth down the road, the official said, adding "there is
some risk to the upside if the efficient delivery of vaccines
across many jurisdictions ultimately results in a globally
synchronized expansion."
When it comes to inflation, she said price pressures remain low.
And while expectations of future inflation gains are moving higher,
they are also still low on a historical basis, Ms. Brainard
said.
The official said that due to comparison to deep inflation
weakness a year ago, it is possible that inflation may make a
"temporary" rise over the next few months and go over the Fed's 2%
target. "It will be important to see sustained improvement to meet
our average inflation goal," Ms. Brainard said.
Ms. Brainard said in her speech that the U.S. economy likely
shrank by 2.5% last year with the pain of the decline
disproportionately borne by small business workers and others. She
said renewed government support actions will play a "vital role" to
help those dislocated by the crisis.
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
January 13, 2021 13:40 ET (18:40 GMT)
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