Fed Governor Brainard Leads Dovish Backlash With Bid to Suspend Rate Hike
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It only took a couple of hours for the first dovish chirps to sound out from the Federal Reserve (Fed), in response to the disappointing May employment report.
Fed Governor Lael Brainard said on Friday that it would be better if policymakers wait until more evidence "that domestic activity has rebounded strongly" emerges, before raising rates in a follow up to the December lift-off.
Waiting on the next increase in the Fed's policy rate would also have the advantage of knowing how the risks from near-term international events, such as the June 23 UK referendum on EU membership, play out. Brainard wanted to make sure these events "will not derail progress toward our goals" of 2% inflation and full employment.
The cautious tone of her remarks was not unexpected. Analysts usually put her in the dovish camp of Fed officials who favor slower policy normalization than their hawkish peers.
However, Brainard's remarks echoed with markets which witnessed the release of a spectacularly bad payrolls report on Friday morning.
"The data in today's labor market report on balance suggest that the labor market has slowed," Brainard acknowledged.
"Recognizing the data we have on hand for the second quarter is quite mixed and still limited, and there is important near-term uncertainty, there would appear to be an advantage to waiting until developments provide greater confidence," the governor said in her prepared remarks to the Council on Foreign Relations in Washington.
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