Federal Reserve governor Lael Brainard called the task of reducing inflation pressures “paramount” and said the central bank will raise interest rates steadily while starting balance sheet reduction as soon as next month.
The Federal Open Market Committee “will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting”, Brainard said in remarks prepared for a speech to the Minneapolis Fed.
The US central bank ended asset purchases last month and raised interest rates a quarter percentage point, while forecasting at least six more increases for the rest of this year to curb the hottest inflation in four decades. Brainard’s comments raised the significance of asset runoff to the FOMC’s sense of overall tightening.
“The reduction in the balance sheet will contribute to monetary policy tightening over and above the expected increases in the policy rate reflected in market pricing and the committee’s Summary of Economic Projections,” she said, referring to the Fed’s quarterly forecasts.
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