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REPEAT:MNI POLICY:Brainard: 'Gradual' Appropriate In Near Term

Repeats Story Initially Transmitted at 17:32 GMT Dec 7/12:32 EST Dec 7
By Kevin Kastner
     WASHINGTON (MNI) - Federal Reserve Governor Lael Brainard said Friday that
the FOMC's gradual path of rate increases has "served us well" and suggested
that that remains the appropriate approach in the near term as the U.S. economy
is currently strong, but could face issues over the next few years.
     The following are the key monetary policy and economic points from her
speech to the Peterson Institute that focused mostly on financial stability:
     - Brainard said that the "gradual path of increases in the federal funds
rate has served us well by giving us time to assess the effects of policy as we
have proceeded." She added that "approach remains appropriate in the near term,
although the policy path increasingly will depend on how the outlook evolves."
     - Brainard noted that labor market indicators have been strong,
unemployment has been low, and that year/year wage growth topped 3% in recent
months, all of which she called "welcome developments."
     - At the same time, inflation remains "muted overall," Brainard said, with
underlying inflation data "providing little signal of an outbreak of inflation
to the upside, on the one hand, and reassurance that underlying trend inflation
may be close to our target of 2 percent on the other."
     - Brainard noted that consumer spending looks "robust" for the fourth
quarter and that business investment should be "solid" even as oil prices have
declined.
     - With all these positive indicators, Brainard said "there are good reasons
to expect growth to remain solid next year." However, she cautioned that some of
the tailwinds that helped the U.S. economy in 2018 are likely to lose their
strength in 2019 and into 2020. She particularly singled out fiscal policy,
which she said should continue to provide a boost into 2019, but could actually
become a headwind in 2020. 
     - Additionally, business capital spending could be impacted by trade policy
uncertainty. Brainard also cited business reports of qualified labor shortages
and increases cost from inputs. Financial conditions has also tightened
recently, Brainard said, and while they still support growth, they less
supportive than last year.
--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

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