Fed’s brainard says economy is improving but still ‘far’ from where it should be

Federal Reserve Governor Lael Brainard said while the US economic outlook has “improved dramatically,” it remains far removed from the central bank’s targets.

“A brighter outlook, but of course our monetary policy forecast is based on outcomes and not outlook, so it will be some time before jobs and inflation reach the kinds of outcomes that are in those predictions, ”Brainard said. on CNBC’s “Closing Bell”.

She spoke shortly after the Fed released the minutes of the Federal Open Market Committee’s March meeting, in which officials voted unanimously to keep borrowing rates short. term close to zero and continue to buy at least $ 120 billion in bonds each month.

Along with an unchanged policy, FOMC members raised their employment and inflation forecasts. But the minutes reflected Brainard’s comments that the economy still needed more improvement before it came close to the Fed’s targets of full employment and sustained inflation above 2%.

“The forecasts are considerably better results on both growth and employment and inflation,” Brainard said. “But again, that’s a perspective. We’re going to have to see that in the data. When you look at the data, we’re still a long way from our maximum employment target.”

Unemployment fell to 6% in March as the economy created 916,000 jobs, well ahead of economists’ expectations. Inflation is rising slightly, although the 1.6% level in March was still well below the Fed’s target.

The Fed has said it will allow inflation to rise just over 2% for a period of time in the interest of achieving full employment that is inclusive of income, race and gender. In recent months, the market has valued both higher inflation and stronger economic growth, but Fed officials say they will maintain the super-easy policy put in place at the start of the Covid crisis. -19.

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The minutes indicated that Fed officials are not worried about inflation despite rising yields on longer-dated government bonds, and Brainard reiterated the idea that any pressure on prices in the near term would not probably won’t last.

“It is really important to recognize that these are transient, and following these transient pressures associated with reopening, it is more likely that the entrenched dynamics that we have seen for over a decade will take over,” a- she declared.

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