Lael brainard, the Federal Reserve Governor, is a proponent of loose policy and low interest rates. However, he stated that Tuesday’s statement by Brainard suggested that the central banking need to move quickly to lower inflation.

Brainard stated that tightening policy will involve a rapid reduction of the balance sheet as well as steady rate increase in interest rates.

She stated in prepared remarks that “inflation is far too high” and that it is susceptible to upstream risks. If inflation indicators and inflation expectations suggest that stronger action is needed, the Committee will take it.

Already, the Fed approved a rate rise of 0.25% at their March meeting. It was the first increase in interest rates for more than 3 years. And it is likely that this will be one of many.

The markets also expect the Fed at its May meeting to outline a strategy for getting rid of some assets worth nearly $9 trillion, including Treasurys and mortgage-backed security. Brainard on Tuesday commented that the process of reducing assets, primarily Treasurys and mortgage-backed securities, will take place quickly.

She said that “the Committee will keep tightening the monetary policy methodically by increasing interest rates and starting to shrink the balance sheets at a rapid rate as soon as we meet in May.” “Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery, with significantly larger caps and a much shorter period to phase in the maximum caps compared with 2017–19.”

The Fed then allowed $50 billion each month in proceeds from maturing bonds to be rolled off and the remainder was reinvested. According to market expectations, the pace of roll-off could be doubled this time.

These moves were made in response to inflation at an unprecedented pace, exceeding the Fed’s target of 2%. According to market expectations, rate hikes will be possible at all six remaining meetings of this year. This could possibly amount to 2.5 percentage points.