US Fed: Inflation is too high, cannot be reversed before curbing ‎it

US Federal Council Vice Chairman Lael Brainard stressed Friday, September 30, the need to address inflation and the importance of not backing off from the task until it is completed.

“Monetary policy will need to be constrained for some time until you are confident that inflation will return to the target,” she said in remarks prepared for a speech in New York. “For these reasons, we are committed to avoiding a premature retreat.”

These comments came a little more than a week after the US Federal Reserve approved its fifth interest rate hike this year, pushing the benchmark interest rate into the 3%-3.25% range.

In September, the increase of 0.75 percentage points was recorded for the third time in a row.

Meanwhile, Fed officials and many economists expect inflation may have peaked, while Brainard warns against complacency.

“Inflation is very high in the US and abroad, and the risk of additional inflationary shocks cannot be ruled out,” she said.

Earlier, the Commerce Department released data showing that inflation continued to rise in August, according to the US Fed’s preferred PCE price index. Core personal consumption expenditures rose 4.9% on an annual basis and 0.6% for the month, both above estimates and well above the Fed’s 2% inflation target.

Since the US Federal Reserve raised interest rates, Treasury yields have risen and the dollar has rapidly increased in value against its global peers.

Brainard pointed to the repercussions of the rise in the US currency, saying that it is exerting inflationary pressures globally.

She added, “In general, the dollar’s rise tends to reduce import prices in the United States.”

The US Federal Reserve is not alone in tightening monetary policy, as central banks around the world are raising interest rates to combat their own inflation problems.

However, the US Federal Reserve was more aggressive than most of its peers, something that the Vice President of the US Federal Reserve said may have spillover effects.