Fed's Brainard: Hold off on rate hike

Citing Friday’s anemic jobs report, Federal Reserve board member Lael Brainard said the central bank should hold off on raising interest rates until the economy improves and global risks wane, lowering the odds of a hike this summer.

“In this environment, prudent risk management implies there is a benefit to waiting for additional data to provide confidence that domestic activity has rebounded strongly and reassurance that near-term international events will not derail progress toward our goals,” Brainard said in a speech at the Council on Foreign Relations in Washington.

Brainard is considered among the more dovish Fed policymakers, meaning she’s typically more concerned about stimulating growth by keeping rates low than heading off inflation by lifting them. Still, she has consistently supported Fed decisions since joining the committee last year. The Fed raised its benchmark rate in December for the first time in nearly a decade but has held it steady since.

Brainard said the risks from waiting to hoist rates “seem lower than the risks associated with moving ahead of these developments.” She specifically cited Britain’s referendum on whether to withdraw from the European Union, scheduled about a week after the Fed’s June 14-15 meeting. She said a vote in favor of a so-called  “Brexit” “could unsettle financial markets and create a period of uncertainty while the relationship between United Kingdom and the EU is renegotiated.”

Brainard also singled out the disappointing payroll report, which showed employers added just 38,000 jobs in May, the lowest total since September 2010. “The data in today’s labor market report on balance suggests that the labor market has slowed,” Brainard said.

She added that she lacks confidence that inflation will return to the Fed’s 2% annual target over the medium-term. And while she welcomed the rebound in stocks and financial markets following turbulence early in the year, she said risks of further stress from China’s economic slowdown could reignite the turmoil.