Federal Reserve Vice Chair Lael Brainard said the central bank should soon moderate the size of its interest-rate increases, signaling she favors slowing to a half-point hike as early as next month.

“It will probably be appropriate soon to move to a slower pace of increases,” Brainard said Monday in a fireside-chat event at Bloomberg’s Washington bureau. “But I think what’s really important to emphasize: We’ve done a lot, but we have additional work to do.”

The U.S. central bank has raised its benchmark interest rate this year from nearly zero in March to a target range of 3.75 percent to 4 percent this month in a bid to slow the economy and bring inflation down from four-decade highs. The most aggressive tightening campaign since the 1980s has included rate hikes of three-quarters of a percentage point at each of the last four policy meetings, triple the usual move.

“There are likely to lag, and it’s going to take some time for that cumulative tightening to flow through,” Brainard said. “So, it makes sense to move to a more deliberate and a more data-dependent pace as we continue to make sure that there’s a restraint that will bring inflation down over time.”

At the same time, Brainard stopped short of explicitly endorsing the idea that the Fed would likely need to raise rates higher than previously projected in September. That’s what Chair Jerome Powell and other officials have said this month.

Asked if she agreed with the chair’s expectation, Brainard stressed the importance of Fed policy being data-dependent.

“Even for just the December meeting’s decision, we still will have additional data in hand by the time that we will — members of the committee will be submitting their new projections. And of course, those projections are going to reflect that data, both on inflation as well as on the labor market activity more generally,” she said. “But it is the case that we do have additional work to do on raising rates.”

Investors expect Fed officials to opt for a half-point hike at their Dec. 13-14 meeting following Powell’s signal on Nov. 2 that such a downshift was in the offing and a subsequent Labor Department report last week which showed increases in U.S. consumer prices may be starting to moderate.

That report showed inflation cooled by more than expected in October, with the consumer price index rising 7.7 percent from a year earlier versus 8.2 percent the month before. 

But officials have stressed that they need to see a series of lower monthly readings to have confidence that price pressures are heading back down to levels consistent with the central bank’s 2 percent target, which is defined in terms of the Commerce Department’s price index for personal consumption expenditures. October data for that measure will be published later this month.

“The most recent CPI inflation print suggests that maybe the core PCE measure that we really focus on might be also showing a little bit of a reduction,” Brainard said. “That would be welcome. I think the inflation data was reassuring, preliminarily, just in terms of showing a slowing in categories that I had been anticipating.”

The Fed has two congressional mandates: price stability and maximum employment. In recent weeks, Democratic senators including Sherrod Brown, who plays a key role overseeing the central bank as head of the Senate Banking Committee, have written letters to Powell expressing concerns that the fight against inflation will lead to unnecessary job losses.

“Obviously risks are going to be more two-sided as we get into more restrictive — or further into restrictive — territory. So, we’ll be balancing those considerations, but we are very much focused on achieving our 2 percent inflation goal,” Brainard said.

“It’s very important to keep inflation expectations anchored around that goal. And so, we’ll just have to make judgments like that as we go forward: What is the appropriate level of restraint on a sustained basis that is going to be necessary to make that balance?”

The vice chair also pointed to data showing the pace of wage increases has begun to moderate.

“I think it’s important to remember that wages have actually not kept up with inflation. Real incomes have actually, on aggregate, fallen, even though wages are higher than what would be consistent with a run rate associated with 2 percent inflation,” she said. “So they really are in the middle there, and they are coming down.”

Officials in September forecast rates would reach 4.6 percent in 2023, but Powell on Nov. 2 suggested projections for the so-called terminal rate would probably move higher when they are next updated at the December meeting.

Investors now see rates peaking just below 5 percent by the middle of next year.

“By moving at a more deliberate pace, we’ll actually be able to see how that cumulative tightening is playing out,” Brainard said. “Exactly what that path looks like I think is really hard to say right now, but I think it will be very much better at balancing those risks by virtue of being able to take on board more data.”