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Brainard sees U.S. rate hikes but eyeing soft inflation
May 30, 2017 / 5:06 PM / 6 months ago

Brainard sees U.S. rate hikes but eyeing soft inflation

NEW YORK, May 30 (Reuters) - 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)

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