U.S. Fed official expects rate hike while paying close attention to soft inflation

Source: Xinhua| 2017-05-31 03:24:40|Editor: Yamei
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WASHINGTON, May 30 (Xinhua) -- U.S. Federal Reserve governor Lael Brainard said on Tuesday she expected the central bank to raise interest rate soon but will pay close attention to the weak inflation data.

Brainard, a long-time monetary policy dove, gave a positive assessment of both U.S. and global economies in her speech at the New York Association for Business Economics.

"With continued strength in the labor market, economic activity regaining momentum and a brighter outlook abroad, it would be appropriate soon to see the federal funds are moving closer to its neutral level," said the Fed governor in her speech.

She downplayed the weak economic performance in the first quarter, saying that economic growth is expected to rebound in the second quarter, because recent data, including residential construction, oil and gas drilling activity, and business investment, are sending "encouraging signs of strength" in the economy.

In addition to the solid economic fundamentals, U.S. financial conditions have been supportive for further gains in the real economy; the latest international economic data have suggested waning downside risks from abroad, while continued labor market strength and the prospect for fiscal stimulus in U.S. present a possible upside risk to U.S. domestic demand, said Brainard.

She expected the Fed's interest rate hikes would be "well under way".

According to forecasts by Fed officials in March, the central bank will raise interest rates twice for this year after its hike in March. Market analysts widely expected the central bank to move up interest rate as soon as in June.

Brainard also expressed her support to reduce the central bank's 4.5-trillion-U.S. dollar balance sheet. "If the economy evolves in line with the March Summary of Economic Projections (SEP) median path, normalization of the federal funds rate is likely to be well underway before too long, setting the stage for a gradual and predictable running off of the balance sheet," said Brainard.

In spite of recent economic progress, Brainard expressed her concern over the weak inflation. "If the tension between the progress on employment and the lack of progress on inflation persists, it may lead me to reassess the expected path of the federal funds rate in the future," she said.