Recap Fed's Brainard - rate hike cycle could continue “over the next year or two”
Federal Reserve Board Governor Lael Brainard spoke overnight:
And, for more, here is Reuters report on her comments:
- Her phrasing echoed recent comments from Fed Chair Jerome Powell that had already begun to lay the groundwork for a longer-than-expected rate-increase cycle.
- But Brainard went further, laying out in detail the thinking behind a rate hike cycle that could continue "over the next year or two," rather than pausing next year as policymakers including the Dallas and Atlanta Fed chiefs have said could make sense.
- In her view, outlined for the first time in the speech, stimulus from tax cuts and government spending under U.S. President Donald Trump are lifting the short-term neutral level of interest rates, a theoretical level of borrowing costs that allows investment and hiring to continue unimpeded in a healthy economy.
- A rise in the neutral level gives more headroom for the central bank to lift rates without slowing growth.
Gonna be more strength to come for the USD if Brainard is correct.
Brainard and a blast from the past