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Brainard: more Fed stimulus needed to help boost economy

Yahoo Finance’s Brian Cheung joins Zack Guzman to discuss Fed Governor Lael Brainard's latest remarks during a virtual Brookings Institution conference about the central bank's role amid COVID-19.

Video Transcript

ZACK GUZMAN: We got some more highlights to cover here in terms of Fed thinking around, not just the rates and staying near that zero interest rate policy here now, but also what played out a few years ago. And joining us now for more on that thinking is Yahoo Finance's Brian Cheung. And Brian, we're getting that update and thinking, Fed governor Lael Brainard, who spoke, started speaking just about an hour ago. What are we hearing?

BRIAN CHEUNG: Well, a rare moment of humility from the Federal Reserve, effectively admitting that they may have moved too soon on trying to hike interest rates between 2015 and 2018. This change in thinking spurred by the Federal Reserve's framework review, the results of which we got last week, when Chairman Jay Powell unveiled his plan to allow the Federal Reserve to overshoot inflation moderately above its 2% target during times or after when it's underside inflation. Lael Brainard again, a Fed Governor speaking today at the Brookings Institution, saying if she had had that current framework in place a few years ago, things may have been a little different. Here's what she said.

LAEL BRAINARD: Beyond that, had the changes that we we are making in the new statement been in place several years, it's likely that accommodation would have been reduced even later, and the gains would have been greater.

BRIAN CHEUNG: So you can hear Brainard right there, saying had that change been in effect a few years ago, they may not have moved that quickly to begin raising rates, which they did, as you recall, in December of 2015. At the time, people were worried that the tight labor market would result in runaway inflation. That never ended up being the case, hence the change in the Fed's framework, which Powell unveiled last week. It will be interesting to see if they can avoid that type of situation, as we find ourselves in a another economic crisis that the Fed will eventually have to dig itself out of.