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MNI POLICY: Fed's Brainard Sees QE Pace For Some Time

(MNI) WASHINGTON
WASHINGTON (MNI)

Federal Reserve Governor Lael Brainard expects it will be "some time" before substantial further progress on inflation and employment is achieved, requiring a push ahead with plans to buy USD120 billion of assets a month.

The FOMC needs to see "substantial further progress" before dialing back QE and Brainard reiterated that commitment Wednesday.

"In assessing substantial further progress, I will be looking for sustained improvements in realized and expected inflation and examining a range of indicators to assess shortfalls from maximum employment," she said in prepared remarks for a Harvard University event.

Inflation could rise temporarily above 2% in a few months when steep price drops from last March and April fall out of the 12-month calculation, but "it will be important to see a sustained improvement in actual inflation to meet our average inflation goal." Core PCE inflation currently stands at 1.5%.

"Inflation remains very low, and although various measures of inflation expectations have picked up recently, they remain within their recent historical ranges," said Brainard. "While I will carefully monitor inflation expectations, it will be important to see a sustained improvement in actual inflation to meet our average inflation goal."

On the labor force, the Fed governor said she will be looking for indicators that show labor market healing is broad-based.

"I would not recommend relying on any single indicator, but rather consulting a variety of indicators that together provide a holistic picture of where we are relative to full employment," said Brainard.

Disaggregating the overall unemployment rate reveals workers in the "lowest wage quartile face Depression-era rates of unemployment of around 23 percent," said Brainard. That likely reflects the concentration of lower-wage jobs in service industries reliant on in-person contact.

MNI Washington Bureau | +1 202-371-2121 | evan.ryser@marketnews.com
MNI Washington Bureau | +1 202-371-2121 | evan.ryser@marketnews.com

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