Fed ‘prepared to take stronger action’ on inflation: Lael Brainard

Yahoo Finance's Brian Cheung reports on the latest Fed speak as the Federal Reserve's Lael Brainard appears to have abandoned her dovish stance in light of inflation challenges.

Video Transcript

BRIAN SOZZI: And indeed, the breaking news keeps coming. Fed Governor Lael Brainard is speaking on inflation at a key conference. And Yahoo Finance's Brian Cheung has been tracking her comments. Brian.

BRIAN CHEUNG: Folks, there are no more doves on the Federal Reserve policy setting committee. Lael Brainard, a Fed governor who has been known historically to favor a slower path to normalizing policy, saying, this morning, that she could see the Federal Reserve taking a stronger stance against inflation.

I want to read you this full screen quote, which she delivered to a conference on inflation today. Said, quote, "Currently, inflation is much too high and is subject to upside risks. The committee is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted."

Now, of course, that doesn't directly say if she supports a double-sized or king-sized bump of 50 basis points in the Fed's next meeting in March. Of course, that hasn't happened since 2000. But it certainly suggests that she wants the flexibility to be able to do so.

She also hinted at Federal Reserve taking off its process of actually shrinking its asset holdings in the next meeting. That's going to be happening in four weeks. And of course, inflation itself remaining a key issue. The crux of her speech was really about the disparate impact of inflation and how it specifically affects lower income households.

Take a look at this statistic. She highlighted that 77% of lower income households spend their income-- or rather, lower income households spend 77% of their income on necessities. That's a lot more than 31% that's sustained by higher income households. So she was really emphasizing the fact that high inflation does appear to be disparately impacting those least able to bear it, which might support her reasoning for why the Fed wants to get more aggressive on interest rates hikes to tamp down on that demand.

And then one last point I want to make-- we haven't heard a lot of commentary from this specific Fed official. That's because she's still undergoing her confirmation process for the number two position as Fed vice chair, where she is still awaiting a full vote from the Senate, guys.

BRIAN SOZZI: Yeah, and Brian, I think we were showing a photo there of Target. So anything Lael Brainard could do to help bring prices down at Target, a little costly, I will take any measures she can bring out. Brian Cheung, see you at 11 o'clock.