(Bloomberg) — Federal Reserve Governor Lael Brainard said the U.S. economy isn't immune to global risks and called for careful adjustments to the policy rate to preserve the expansion.
The speech, to the Institute of International Bankers annual conference in Washington, was one of the most detailed arguments to date by a Fed official on downside risks to the outlook despite several economic reports showing continued underlying strength in hiring and consumption.
Brainard said there are reasons to expect continued gains in employment, stabilizing growth in foreign economies, and an eventual rise of inflation back to the Fed's 2 percent target. "However, there are risks around this baseline forecast, the most prominent of which lie to the downside," she said.
"Given weak and decelerating foreign demand, it is critical to carefully protect and preserve the progress we have made here at home through prudent adjustments to the policy path," she said.
Speaking at a separate event in Washington, Fed Vice Chairman Stanley Fischer contested the idea that the connection between low unemployment and inflation was broken, and said it may be reasserting itself now. The nation's unemployment rate was 4.9 percent in February.
"The link has never been very strong, but it exists, and we may well at present be seeing the first stirrings of an increase in the inflation rate — something that we would like to happen," he told the National Association for Business Economics in prepared remarks mostly focused on the history of economic thought.
