Federal Reserve Vice Chair Lael Brainard noted Thursday that recent reports show high inflation in the United States is cooling and suggested it was possible that price acceleration may cool without causing significant job losses.
Speaking in Chicago, Brainard sketched out a more optimistic outlook for inflation than some some Fed speakers have in recent days.
At the same time, Brainard cautioned that inflation is still high and said the Fed would have to keep interest rates elevated “for some time” to curb price growth. She did not explicitly signal whether she would support a quarter-point or half-point rate increase at the Fed's next meeting Jan. 31-Feb. 1.
Even so, Brainard, an influential voice on policy who is close to Chair Jerome Powell, pointed to several trends that she said were likely to lower inflation in the coming months.
The cost of goods such as autos, furniture and clothes has declined, along with energy prices, she said. There are signs the job market is cooling, including a drop in the average workweek, which could signal smaller wage increases. Though higher pay is good for workers, it can fuel inflation if businesses charge more to offset their rising labor costs.
And Americans still generally expect inflation to decline in the coming years, Brainard noted. That's an important measure because if people assume that prices will keep rising, they will alter their behavior by accelerating their purchases before prices rise further. They may also push for higher pay to offset rising costs, thereby worsening inflation.
