The Federal Reserve will conduct a series of interest rate hikes and begin reducing its massive bond holdings as soon as June to help bring down inflation that hit a fresh 40-year-high in March, Fed Governor Lael Brainard said on Tuesday.
Getting inflation back down toward the Fed's 2% goal is the central bank's "most important task," Brainard told the Wall Street Journal in an interview. Consumer prices soared 8.5% in March, a government report showed on Tuesday.
But combined with a shrinking balance sheet, she said, rate hikes will "bring the policy stance to more neutral posture expeditiously later this year," she said.Policymakers are generally agreed on a plan to trim $95 billion monthly from their $9 trillion balance sheet, minutes from their March meeting show. That process over time should be the equivalent of raising the Fed's policy rate two or three times, Brainard said.
Even so, she said, she expects demand - and therefore inflation - to fall this year not just because of tighter policy but also because households will no longer have the extra fiscal support that government provided last year to cushion the pandemic blow.
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