The American central bank (Federal Reserve, Fed) stands “ready to act more strongly” if necessary, assured one of its governors on Tuesday, judging it “essential” to slow down inflation which is at its highest for 40 years. in the USA.
The Fed Monetary Committee (FOMC), the body that notably sets key rates, is ready to act more strongly if the inflation indices and outlook indicate that such action is justified, underlined Lael Brainard, Governor of the Fed, during a virtual Minneapolis Fed speech.
Getting inflation down is key, she continued.
To do this, the Fed will continue the methodical tightening of monetary policy through a series of interest rate hikes and by starting to reduce the balance sheet at a rapid pace from (its) meeting in May, the next, specified the official, although known to be in favor of an accommodating interest rate policy.
Lael Brainard pointed out that high inflation penalizes households with the lowest incomes more strongly.
Inflation in the United States is at its highest for 40 years, 6.4% in February according to the PCE index, favored by the Fed, and 7.9% according to another index, the CPI, used in particular for the indexation of pensions.
The rise in prices should accelerate further in the coming months.
The war in Ukraine has contributed to an additional spike in inflation, particularly with the prices of gasoline and food.
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These geopolitical events also pose downside risks to growth. That said, the US economy entered this period of uncertainty with considerable demand momentum and a strong labor market, she pointed out.
The unemployment rate continued to decline in the United States in March, 3.6%, and is now very close to its level before the Covid-19 pandemic, when it was at its lowest in 50 years.
Lael Brainard has been chosen by Joe Biden for the post of Vice President of the Fed. The Snat has not yet met to vote and thus confirm his nomination.
The upper house must also decide on the second mandate offered to the president of the Fed, Jerome Powell, as well as on the appointments of two new governors, Philip Jefferson and Lisa Cook.