"Inflation is very high in the United States and abroad, and the risk of additional inflationary shocks cannot be ruled out," Brainard said at an event hosted by the New York branch of the Fed. "It will take time for the full effect of tighter financial conditions to work through different sectors and to bring inflation down. Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target."
Brainard’s comments came on the heels of a report from the Commerce Department on Friday that barely showed a retreat in inflation levels last month.
The Federal Reserve’s preferred inflation indicator, the Personal Consumption Expenditures Index, grew 6.2% during the year to August, versus 6.3% in the 12 months to July.
Economists polled by US media had expected the so-called PCE Index to expand by just 6% during the year to August.
On a monthly basis, the PCE Index actually grew more in August than in July, rising 0.4% from a previous 0.1%. Economists had expected a monthly growth of just 0.2% in August.
The readings showed that the Federal Reserve’s battle against inflation had barely eased despite sharp drops in gasoline prices over the past three months. The Fed has warned that it will not let up on rate hikes it had embarked on since March to fight inflation.
"Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target," Brainard said on Friday, reinforcing the Fed policy on this.
21 September 2022, 19:22 GMT
A broader gauge of US inflation, called the Consumer Price Index, or CPI, has stubbornly held near four-decade highs of above 8% per annum for about a year now — more than four times the Fed’s 2% target.
To fight inflation, the Fed has raised interest rates by 300 points this year, from an original base of just 25 points in February. The central bank’s chairman Jerome Powell said last week that US rate hikes will have some way to go before the Fed considers a pause or reduction, with the likelihood of another 125 basis points being added before the end of the year.