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Fed Brainard says reducing inflation is a top priority




Federal Reserve Governor Lael Brainard, the White House nominee to serve as the central bank’s No. 2 official, told Congress that efforts to reduce inflation are the central bank’s “most important task.”

Brainard, who joined the Fed in 2014, was a strong advocate last year to ensure that the central bank did not limit stimulus too early as part of a focus on stimulating a robust improvement in the labor market.

Her comments on Thursday morning at a confirmation hearing for the Senate Banking Committee are the latest sign of how the central bank has reacted to inflation. Fed officials have signaled in recent days that they can raise interest rates at their meeting in mid-March.

Brainard added these expectations on Thursday, pointing out how the central bank was in the process of concluding an incentive program for the purchase of assets by March.

The Fed̵[ads1]7;s interest rate committee “has estimated several increases during the year. We will be able to do that as soon as the purchase of assets is completed,” says Brainard. “And we simply have to see what the data requires during the year.”

Brainard pointed to a rapid decline in unemployment. “But inflation is too high, and workers around the country are worried about how far their pay slips will go,” she said. “Our monetary policy is focused on bringing inflation back to 2%, while maintaining an inclusion that includes everyone.”

High demand for goods and a shortage of intermediates such as semiconductors have pushed 12-month inflation to the highest level in decades. Core consumer prices, which exclude unstable food and energy categories, were up 4.7% in November from the previous year, according to the Fed’s preferred target, well above the Fed’s 2% target.

Brainard said that bottlenecks and other supply-related problems contributed to much higher prices for certain goods, such as energy and food. But she added that the Fed was prepared to raise interest rates to cool demand across the economy more broadly as needed to reduce inflation.

“We have a powerful tool, and we will use it to bring inflation down over time,” Brainard said.

Brainard won the support of two parties when she was confirmed for her current position at the Fed in 2014 and when she became a top official in the Treasury Department in 2010 under the Obama administration. She also served as an adviser on international finance to President Bill Clinton.

Democrats control the Senate with Vice President Kamala Harris able to break a 50-50 tie, and Brainard is expected to win confirmation of his new position.

Brainard, 59, has worked closely with Fed Chairman Jerome Powell during his tenure as head of the central bank. In November last year, Mr. Biden nominated Powell to serve a new term as head of the Fed after his current one expires next month. The president promoted Brainard to serve as deputy commander after also considering her as a candidate to serve as Fed chairman.

If confirmed, Brainard will succeed Richard Clarida, who is set to retire on Friday.

In a confirmation hearing for his second term as central bank governor, Jerome Powell said the central bank would use its tools to curb inflation. Photo: Graeme Jennings / Press Pool

Write to Nick Timiraos and nick.timiraos@wsj.com

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