(Bloomberg) -- Federal Reserve Vice Chair Lael Brainard said US central bankers must lean against the risk of inflation expectations rising above the 2% target in a world where inflation may be less stable than in recent decades.

“In the presence of a protracted series of supply shocks and high inflation, it is important for monetary policy to take a risk-management posture to avoid the risk of inflation expectations drifting above target,” Brainard said in remarks released Monday. 

“A drawn-out sequence of adverse supply shocks that has the cumulative effect of constraining potential output for an extended period is likely to call for monetary policy tightening to restore balance between demand and supply.”

The Fed said her presentation was an updated version of June 24 comments made by Brainard during a Bank for International Settlements conference in Basel, Switzerland.

US central bankers have raised interest rates aggressively this year to try and curb with inflation that has jumped to 40-year highs. They next meet Dec. 13-14 and investors expect them to hike by 50 basis points, slowing down after four consecutive 75 basis-point increases that has lifted the target range for benchmark rate to 3.75% to 4%.

Brainard said inelastic supply is what distinguishes the post-pandemic recovery from the preceding 30 years, and even if constraints are temporary there is the risk that the longer they are drawn out, the more effect it has on the economy’s potential to grow.

“A protracted series of adverse supply shocks could persistently weigh on potential output or could risk pushing inflation expectations above target in ways that call for monetary policy to tighten for risk-management reasons,” Brainard said. 

She said it is also possible that longer-term changes, such as those associated with labor scarcity, a relocation of supply chains, and climate change “could reduce the elasticity of supply and increase inflation volatility into the future.”

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