Federal Reserve Governor Lael Brainard said Monday that the central bank needs to be patient in its plans for tightening monetary policy.
Brainard, a known "dove" on the policy-setting Federal Open Market Committee, warned eight days before the next FOMC meeting that, given the slow global economy and the absence of inflationary pressures, the Fed needs to be prudent after having raised its benchmark interest rate in December.
While the US economy has been resilient, she said, "we should not take the strength in the US labor market and consumption for granted."
"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."
Brainard was speaking to the annual Washington conference of the Institute of International Bankers.
She noted that financial market conditions have already tightened significantly despite the mere quarter-point increase in the federal funds rate in December,
That, combined with softening expectations for inflation in the market, risk pulling both growth and inflation lower, against the goals of FOMC policy.
"From a risk-management perspective, this argues for patience as the outlook becomes clearer," she said, according to her prepared remarks.
The FOMC meets on March 15-16 to review the economic situation and its policy path.
In December, when it undertook the first increase to the benchmark short-term rate in more than nine years, the FOMC projected up to four interest rate hikes this year to take the rate to 1.25-1.50 percent by year end.
But the sluggish global economy, the crash of the oil market, and especially the extent of China's downturn, are reasons to move more slowly, Brainard suggested.
"Inflation has persistently underperformed relative to our target," she noted.
"We should be cautious in assessing that a tightening labor market will soon move inflation back to two percent. We should verify that this is, in fact, taking place."