MNI POLICY: Fed Brainard: Downside Risks Call For Lower Rates

By Jean Yung

     WASHINGTON (MNI) - Federal Reserve Governor Lael Brainard said Friday that

it makes sense to lower interest rates when risks shift to the downside in a

time when rates are close to zero.  

     "Crosscurrents from policy uncertainty have risen since early May, crimping

business investment plans, raising concerns in some financial market segments,

and weighing on global growth prospects," she said in remarks prepared for a Fed

conference in Cincinnati. 

     "Basic principles of risk management in a low neutral rate environment with

compressed conventional policy space would argue for softening the expected path

of policy when risks shift to the downside." 

     She remains optimistic that economic growth will continue at a solid pace,

but pointed out that recent indicators of inflation and inflation expectations

have been disappointing, "making it all the more important to sustain the

economy's momentum," she said. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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