"I genuinely believe that the large majority of members of the Federal Reserve do see the threat to inflation from tariffs as being quite material."
Former U.S. Fed Vice Chair Lael Brainard on the Fed's decision to hold rates.
2:11Or is there a real fear amongst policymakers that they dare not be seen to be, even the perception of giving in to White House pressure?
3:42But on the other side, and I realize how I'm doing on the one hand, on the other hand, if you get to September and, you know, all things being equal, we are where we are now, then doesn't it become just about impossible not to reduce rates?
6:35And no amount of your staff putting in front of you this argument or the other argument, or this bit of data or the other bit of data, does it ever come down to what it feels like in the gut?
They are indeed. I'm good. Good to see you, Matt. At the Fed now, as we continue, the phrase that keeps coming up is that economic uncertainty has caused a turbulent balance between the hawks and the doves. It's known as the balance of risk. The committee will carefully assess incoming data and the balance of risks. So what is the balance of risks? Well, for the hawks who voted to keep rates steady, you have a labor market that's still very strong with unemployment at 4.1%. And you've got trade policy that is threatening to raise prices. Inflation has ticked up. But on the other hand, you've got inflation that is way down from its all-time highs. You've got an economy that's growing reasonably well. And now the Fed has pressure to hold up for both sides from the president, as President Trump, of course, is trying to put his finger firmly on the scales. Which way will the scales go? Lael Brainard is the former vice chair of the Fed. She also served as the director of President Biden's National Economic Council. Now, you told us that you would have been inclined to cut rates, but you would not have dissented. Is dissenting a big deal for the Fed, Lael?
Dissenting is a very big deal for members of the board. It happens very rarely. Now, these members are both Trump appointees, and they have actually dissented in the last year, so it is less unusual for them. Dissenting on monetary policy, however, is unusual. And there's a lot of deference to the chair, particularly at moments like this, where the decision between cutting today in July and waiting for two more months of data to see whether to cut in September is just a very finely balanced decision.
But if it's so finely balanced, why not just do it? Take a quarter point. I mean, what is the fear that suddenly you're going to be off to the races, inflation's going to reignite? And is that not the risk of this pressure cooker as great as not doing anything? Or is there a real fear amongst policymakers that they dare not be seen to be, even the perception of giving in to White House pressure?
So I don't think that's what's going on. I genuinely believe that the large majority of members of the Federal Reserve do see the threat to inflation from tariffs as being quite material. And we know that the last time tariffs were raised a fair amount, which was in the first Trump administration, it took four to six months for those tariff increases to really get passed through into consumer prices. So the reason that the large majority of the members of the Open Markets Committee has wanted to give it a little more time is because these are the crucial months when you're going to start seeing the effects of tariffs on prices, and you've got two more months of data that they will have in hand before September. So for them, that is the reason to wait. And of course, the labor market is still looking very balanced because unemployment is still 4.1%. So they may not be as concerned about a weakening in the labor market.
6 more exchanges in this transcript
Sign in free to read the rest of this interview. No card required.
Brainard, L. (2025, July 31). Former U.S. Fed Vice Chair Lael Brainard on the Fed's decision to hold rates [Interview transcript]. Quest Means Business. CEOInterviews.AI. https://ceointerviews.ai/interview/925069/
MLA
Lael Brainard. "Former U.S. Fed Vice Chair Lael Brainard on the Fed's decision to hold rates." Quest Means Business, 31 Jul. 2025. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/925069/.
BibTeX
@misc{brainard2025_925069,
author = {Lael Brainard},
title = {Former U.S. Fed Vice Chair Lael Brainard on the Fed's decision to hold rates},
howpublished = {Interview transcript, Quest Means Business. CEOInterviews.AI},
year = {2025},
month = {jul},
url = {https://ceointerviews.ai/interview/925069/},
note = {Speaker-attributed transcript with timestamps}
}
