US Fed vice chair says interest rates to remain high despite easing inflation

By Ovunc Kutlu

ISTANBUL (AA) - US Federal Reserve Vice Chair Lael Brainard said Thursday that interest rates need to remain high for some time despite easing inflation.

"Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2 percent on a sustained basis," she said during a speech at the University of Chicago Booth School of Business in the state of Illinois.

She noted that inflation has declined in recent months, which is important for American households, businesses and consumers, but added that it will take time for the Fed to bring it down from record levels.

Annual consumer inflation came in at 6.5% in December, easing from 7.1% in November, while the annual producer inflation eased to 6.2% in December, slowing from November's gain of 7.3%.

While the Fed has undertaken one of its most aggressive monetary tightening cycles in decades, this has increased worries that the American economy could face a recession this year.

"The widespread expectation for US growth to be below potential over 2022 and 2023 reflects significant tightening in both fiscal and monetary policy in an environment of broader global tightening," said Brainard. "The drag on US growth and employment from monetary policy is likely to increase in 2023 because of transmission lags from the rapid, large swing from accommodation to restraint in 2022."