Federal Reserve governor Lael Brainard on Tuesday cited ongoing economic sluggishness and recent weak economic data in a speech that seemed to bolster the case for delaying an interest rate hike.
Speaking at the Center for Strategic and International Studies in Washington, Brainard said that it would be “difficult, based on the data available today, to dismiss the possibility of a more significant drag on the economy” from the strength of the dollar and declining oil prices.
Brainard laid out several reasons “not to ignore” recent disappointing economic statistics, especially the revised gross domestic product report for the first quarter that found the U.S. economy shrinking at a 0.7 percent annual rate.
In particular, she noted that there are no signs yet of a “significant bounceback” in the second quarter. Such a snapback would be expected if the first-quarter weakness were due mostly to some of the transitory factors some economists have blamed, including unusually harsh weather, West Coast port labor strikes, or problems with the official seasonal adjustments for the gross domestic product statistics.
Instead, Brainard suggested, the problems with the economy might run deeper, and might be facing headwinds in the form of slow economic growth overseas.
Brainard’s comments seem to hint at the possibility that the Fed may not be raising its target interest rate until 2016 if conditions don’t improve.
However, Federal Reserve chairwoman Janet Yellen recently indicated that a rate hike was still in store this year despite the disappointing economic indicators. The Fed has held rates near zero since 2008 in an effort to stimulate the economy.
Tuesday’s speech was Brainard’s first substantive public discussion of monetary policy since being appointed to the Fed board in June of last year. Previously, she was an official in the Obama Treasury Department.
Fed governors have generally voted with the committee’s chairs in recent years.
Brainard is not the only official in the Federal Reserve System, however, to highlight the possibility that the U.S. recovery faces real problems and not just temporary winter-related difficulties. Federal Reserve Bank of Boston president Eric Rosengren aired similar concerns Monday.
