NEW YORK May 30 A U.S. interest-rate hike is
probably coming soon though the Federal Reserve may want to
delay if recently soft inflation readings continue, an
influential Fed governor said on Tuesday, adding she also backs
shrinking the central bank's bond portfolio "before too long."
In a mostly upbeat speech in which she mapped out a very
gradual reduction in bond holdings, Fed Governor Lael Brainard
said she is however most concerned with a lack of progress in
pushing inflation up toward a 2-percent goal.
"It would be reasonable to conclude that further removal of
accommodation will likely be appropriate soon," she said in
prepared remarks, without mentioning the Fed's next policy
meeting in mid-June.
Yet "if the tension between the progress on employment and
the lack of progress on inflation persists, it may lead me to
reassess" that prediction, added Brainard, a dovish permanent
voter on U.S. monetary policy. "The apparent lack of progress in
moving core inflation back to 2 percent is a source of concern."
The U.S. central bank has raised rates twice since December
and investors widely expect it to tighten policy again next
month. Meanwhile, after two surprisingly weak months of price
data, a government report earlier on Tuesday showed that
inflation rebounded last month.
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)