Economic progress continues in the U.S., but its central bank would be wise to continue keeping policy loose, Fed Governor Lael Brainard said in a closely watched speech Monday.
Amid market concerns that the Fed was about to resume its rate-hiking cycle, Brainard instead offered cautionary tones against moving too fast. In particular, she remains concerned about the impact that global difficulties will have on the U.S. economy.
Still-muted inflation and uncertain developments ahead "counsels prudence in the removal of policy accommodation," Brainard said, according to prepared remarks she was to deliver to The Chicago Council on Global Affairs. "I believe this approach has served us well in recent months, helping to support continued gains in employment and progress on inflation."
Chances of a rate hike at the Fed's next meeting immediately slumped after news of Brainard's speech broke. Traders now anticipate just a 15 percent probability, down from 21 percent before the speech and as high as 30 percent Friday. However, the likelihood of a move before the end of the year edged up slightly, now standing at 59.2 percent, up from 57.7 percent.