Lael Brainard, a governor with the Federal Reserve Board, joined Yahoo Finance on Wednesday to discuss the state of the economy and the outlook for monetary policy.

Below is a transcript of her appearance:

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BRIAN CHEUNG: We are here in Chicago at the Fed Listens Monetary Policy Conference. I am sitting here with the Federal Reserve Governor Lael Brainard. Thank you so much for joining me this morning.

LAEL BRAINARD: It's a pleasure to be here.

BRIAN CHEUNG: So I want to ask first about the commentary from Chairman Powell yesterday. He was talking about trade in his opening remarks. I'm just wondering about currently, how do you see the current trade situation? And is a policy response from the Fed warranted at this time?

LAEL BRAINARD: Yeah, so I would say the US economy generally is in the midst of a very lengthy expansion. The US consumer remains confident. But trade policy is definitely a downside risk to the economy. And you know, our job is to-- to sustain the expansion, and we'll need to see going forward what that means for policy.

BRIAN CHEUNG: So in terms of sustaining the trade expansion, what would that mean? Would that warrant maybe perhaps a rate cut if the trade issues were to extend, let's say, through the end of this year?

LAEL BRAINARD: So I'm going to look at the outlook holistically. And certainly, trade policy uncertainty is a downside risk. But again, the US consumer's been strong, so as we go forward in the-- you know, as the data comes in, we'll just have to see what that means. And we'll be prepared to adjust policy to sustain the expansion.

BRIAN CHEUNG: So you have some unique background, given your work at the treasury. You've participated in G7s and G20s in years past. I'm wondering how difficult of a situation this kind of trade situation is at the moment, and kind of how that factors into from the lens of the Fed or Federal Reserve now how you kind of approach assessing that situation.

LAEL BRAINARD: Well, I would say the world economy is in a delicate place. You know, we saw the World Bank downgrading growth forecasts yesterday. Trade is a big part of that. So trade policy matters. And obviously, the international outlook matters also for the US economy.

[See Also: Lael Brainard: Fed 'prepared to adjust policy' as trade concerns mount]

BRIAN CHEUNG: So switching gears a little bit, fascinating panel yesterday that you had here in Chicago about maximum employment or just what the tight labor market looks like in practice from a Main Street perspective. You had some interesting people from the AFL-CIO kind of talk about how maybe Main Street isn't benefiting necessarily all across the board from the tight labor-- labor market. Are we currently at full employment for the time being?

LAEL BRAINARD: So I think what the discussions here in Chicago have really shown is that there is no destination point for full employment. There's no one number that you could pick and say we're there. What happens as the economy strengthens and as business hires is they start being willing to look at hires that they might not have looked at even two years ago, people that might not yet have the requisite skill sets, or the requisite work experience, or perhaps formerly incarcerated people, or people that may previously not have passed drug tests.

So what we're seeing as the economy goes into this very extended expansion is that we're bringing people back into productive employment. And that's just a-- that's just a positive for those individuals, for their families, but it's also a positive for the economy.

BRIAN CHEUNG: Right. So ADP private payroll numbers came in this morning, adding only 27,000 in May. That's the lowest since 2010.

We also have a jobs payroll coming this Friday. So what are you paying attention to as we continue to hit new lows for the unemployment rate, but as you're mentioning, that's not always just the one metric that we need to pay attention to.

LAEL BRAINARD: So I think I look very carefully at the payrolls number that comes out at the end of this month. I don't tend to take too much signal from one particular data point. I like to put it in context and look over several months and look at that trend line.

But I will be paying very close attention to the payrolls number on Friday. And the labor market does give us a lot of signals about what's going on in the economy. Initial claims is another important one that I pay a lot of attention to.

BRIAN CHEUNG: So switching gears, this Monetary Policy Conference is more broadly about reviewing the strategies perhaps that the Fed might need to employ in the next crisis. And something that you've talked about, in addition to Vice Chairman Clarida is the idea of maybe targeting the yield curve, taking advantage of the balance sheet or engaging in asset purchases to address longer term interest rates. What's the appetite among the Fed board to adopt a policy like that, given that the jury's still out on the successes or the consequences of Operation Twist?

LAEL BRAINARD: Yeah, so I would say that as I think about where we are, we have a interest rate that's likely to be quite a bit lower than what we were accustomed to in previous periods where we needed to cut rates. So you know, in previous recessions on average, we've cut rates by four to five percentage points. Obviously, with the equilibrium or long run neutral rate likely to be two percentage points lower than it has been historically, we have to be more open minded about using a broader set of tools.

And we saw in the crisis that balance sheet policies work. The balance sheet policies that were used were focused on quantities. A yield curve control would simply be more traditional in the sense that it would simply move out the yield curve, targeting interest rates rather than quantities. But the effect would be, presumably, very comparable.