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Communication by the Federal Reserve (Fed) has become an increasingly important tool to help manage monetary policy and last week’s speech by Fed Governor Lael Brainard was no exception. Brainard, who is historically a more dovish Fed official, surprised investors with tough talk on inflation and the potential for more rapid balance sheet reduction. The timing was notable given the recent negative headlines surrounding economic risks associated with the 2-year/10-year Treasury yield curve inversion. The yield curve steepened immediately after Tuesday’s speech, with long-term rates leading the move higher.
Inflation will be in focus for this week’s economic calendar, with the March Consumer Price Index being released on Tuesday and expected to hit 8.4% year-over-year, followed by the Producer Price Index on Wednesday. Thursday’s readings of retail sales and the University of Michigan’s Consumer Sentiment Index — already at its lowest level in the past decade — will provide more data points on the impact of high inflation on the U.S. consumer.
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