“The market pricing in 50 basis point hikes potentially in June and July and, with the data at hand today, that seems like a reasonable path,” Brainard told CNBC. September is less clear, he noted.
“However, if we don’t see a deceleration in the monthly inflation numbers, if we don’t see this really strong demand start to cool somewhat, then it’s probably appropriate to have another meeting where we continue down the same path,” she added.
The U.S. central bank has raised interest rates by three-quarters of a percentage point this year and most Fed policymakers support raising them another half percentage point at each of its next two meetings.
Atlanta Fed President Raphael Bostic suggested that by September the Fed should take a pause and assess the state of the economy before further tightening monetary policy.
Brainard said that is unlikely and indicated that the discussion will focus only on whether to raise rates by a quarter or a half percentage point that month.
“At this point it’s very hard to see arguments for a pause,” she noted on CNBC. “We still have a lot of work to do to get inflation to our 2% target.”
Brainard is often seen as one of the Fed’s more cautious constituents, but in her new role as the institution’s vice chairwoman-she was sworn in last month-her comments are seen as expressing the view of the core of the U.S. central bank’s leadership.
Interest rate futures traders currently take for granted that the Fed’s policy rate will close the year in a range of 2.75%-3%, two full percentage points above the current level.
Policymakers will meet again in mid-June and this week is the last week they are free to speak publicly before the usual communications blackout ahead of their meeting.
“We’re certainly going to do what’s necessary to bring inflation down,” Brainard said. “That’s our number one challenge right now. We’re starting from a position of strength, as the economy is counting on a lot of momentum.” (Reporting by Ann Saphir and Lindsay Dunsmuir; edited in Spanish by Marion Giraldo and Carlos Serrano)