Fed board member calls for holding interest rates

Lael Brainard, a member of the U.S. Federal Reserve Board of Governors, has called for the central bank to hold interest rates for some time.

"Risk management considerations counsel a stance of waiting to see if the risks to the outlook diminish," Brainard said, in a speech late on Monday.

Brainard's dovish speech suggested that the upcoming Fed meeting on Oct. 27-28 will not see an interest rate rise. 

Brainard cited slower progress on employment than expected, as well as stubbornly low inflation, and a gloomy overall trend in the global economy as reasons to hold interest rates for the foreseeable future.

-Slow progress on the labor market

While Brainard noted steady improvement in the labor market, she said: "There may be some distance to go to achieve full employment," and there is "an absence of any acceleration in wages and prices."

"A variety of evidence suggests there may be some distance to go to achieve full employment. Although the unemployment rate is near longer-run norms, other measures of labor utilization are not. The labor force participation rate remains materially below the pre-recession trend," Brainard said.

"Perhaps the most striking evidence in support of continued labor market slack is the absence of any acceleration in wages and prices," she added.

Inflation remains low

"Inflation has been stubbornly low," she added. "Overall inflation has been subdued, running persistently below our 2 percent target. The personal consumption expenditures price index (PCE) increased only 0.3 percent over the 12 months ending in August," she pointed out. 

Brainard also cited concerns about the global economic outlook.

"Over the past 15 months, U.S. monetary policy deliberations have been taking place against a backdrop of progressively gloomier projections of global demand," she said. "The International Monetary Fund [IMF] has marked down 2015 emerging market and world growth repeatedly since April 2014."

Slow global growth, and the sharp devaluation of foreigin currencies against the dollar, have weighed on U.S. exports, Brainard noted.

"The challenges China faces today are raising questions about emerging-market growth prospects more broadly. Most immediately, China's buildup of past property, and more-recent stock market, bubbles together with a steep run-up in business debt levels and questions about the policy stance and the outlook have raised concerns about downside risks," Brainard said.

"Expectations of additional weakness in global demand could have important effects on the exchange rate of the dollar, the valuation of risky assets in the United States, and U.S. inflation, moving the economy further from our goals," Brainard warned.