Federal Reserve Vice Chair Lael Brainard said Thursday that high inflation in the United States is easing and suggested it was possible that the Fed’s interest rate hikes could slow price acceleration without causing significant job losses.

Speaking in Chicago, Brainard sketched out a more optimistic outlook for inflation than some Fed speakers have in recent days.

At the same time, Brainard cautioned that inflation is still high and said the Fed would have to keep borrowing rates elevated “for some time” to curb price growth. She did not explicitly signal whether she would support a quarter-point or half-point rate increase in the Fed’s benchmark short-term rate at the Fed’s next meeting Jan. 31-Feb. 1.

But Brainard suggested that smaller rate hikes would make it easier for the Fed to gradually assess how rate hikes were affecting inflation and the overall economy. Most economists think the Fed will raise its key by a quarter point at the next meeting. That move would follow a half-point rate increase in December and four three-quarter-point hikes before that.

Brainard, an influential voice on policy who is close to Chair Jerome Powell, pointed to several trends that she said were likely to lower inflation in the coming months. The cost of goods such as autos, furniture and clothes has declined, she noted, along with energy prices.

There are also signs that the job market is cooling, including a drop in the average workweek, which could signal smaller wage increases. Rapid pay growth can fuel inflation if businesses respond by raising prices to offset their higher labor costs.

And Americans still generally expect inflation to decline in the coming years, Brainard noted. That’s an important measure because if people assume that prices will keep rising, they will alter their behavior by accelerating their purchases before prices rise further. They may also push for higher pay to offset rising costs, thereby worsening inflation.

All those factors, Brainard said, “may provide some reassurance that we are not currently experiencing a 1970s-style wage–price spiral.”

“For these reasons,” she continued, “it remains possible” that high inflation could be curbed “without a significant loss of employment.”

Fed officials are facing a set of increasingly difficult and high-risk decisions. After a series of big rate hikes last year, the central bank has raised its benchmark interest rate closer to the level that officials believe will finally tame inflation. That level is now the highest it has been in 15 years: 4.25% to 4.5%.

At the same time, the Fed’s key rate is also nearing levels that might turn out to be higher than needed to defeat high inflation — a miscalculation that would likely send the economy into a recession.

Brainard departed from most recent Fed speakers by not specifying the final level that she thought the Fed’s key rate should reach. Most other Fed officials who spoke this week have said it should top 5%.

She also diverged from many of her colleagues by suggesting that rising paychecks for employees at restaurants, retail stores and other services businesses weren’t necessarily the driving force of higher prices. Instead, she suggested that other factors were also at play, including the pass-through of higher fuel prices into such services as airplane fares and shipping costs. She also noted that some companies have raised prices by more than their costs have increased.

As supply chain snarls continue to ease, consumers slow their spending and many companies clear out excess inventories, Brainard said, those margins should shrink and “could contribute to disinflationary pressures.”

Some recent signs suggest that the economy is weakening. The housing market has been severely damaged by higher mortgage rates. This week, a report on retail sales showed that Americans pulled back on their spending last month, though some of the decline reflected lower prices for cars, gas, and other goods. Manufacturing output fell. And surveys of service companies and factories earlier this month pointed to shrinking production.

Other Fed officials have sounded a hard line on inflation and emphasized that they still support raising the central bank’s key rate above 5%. Some officials favor a full percentage point of additional rate increases.

“We’re not at 5% yet, we’re not above 5%, which I think is going to be needed given where my projections are for the economy,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said Tuesday in an interview with The Associated Press.

The combination of still-higher rates and gloomy economic data helped send financial markets sinking Wednesday, with smaller declines continuing Thursday.

(AP)