Published: Fri, January 10, 2020
Economy | By

Fed’s Richard Clarida Says Policy Appropriate If Economy Stays on Track

Fed’s Richard Clarida Says Policy Appropriate If Economy Stays on Track

Federal Reserve policy is appropriate amid solid US economic growth but there is a risk that inflation continues to fall short of the central bank's 2% target, officials said.

US central bank officials need to hold themselves accountable and boost communication of their strategy as they grapple with the challenge of preventing inflation - and inflation expectations - from falling too low, a senior Fed official said Thursday. "There are some indications that headwinds to global growth may be beginning to abate", Clarida said. "The unemployment rate is at a 50-year low, inflation is close to our 2% objective, gross domestic product growth is solid".

He said he would support more accommodative monetary policy if inflation continues to weaken or if inflation expectations slide.

Monetary policy is in a "good place" - after three rate cuts past year - and will continue to support growth, Clarida said in a speech.

Looking ahead, monetary policy is not on a preset course.

While policy is "in a good place", he said that "if developments emerge that, in the future, trigger a material reassessment of our outlook, we will respond accordingly". The Committee will proceed on a meeting-by-meeting basis and will be monitoring the effects of our recent policy actions along with other information bearing on the outlook as we assess the appropriate path of the target range for the federal funds rate.

Minneapolis Fed President Neel Kashkari said Thursday that the rate reductions made by the Federal Reserve previous year helped reduce the recession risks linked to weak business investment and geopolitical tensions and that he expects interest rates to be on hold for the foreseeable future.

"Fed will adjust details of repo operations as appropriate, though ongoing purchases may be needed at least through April". He said officials will discuss that strategy during the next policy meeting, which is scheduled for the end of the month. The outlook now, he said, is for a "soft landing" from the recession risks that spiked past year around the trade war, with growth slowing, though not dramatically.

Thank you very much for your time and attention.

Clarida said he agreed with Dallas Federal Reserve Bank President Robert Kaplan, who has called for central bankers to focus on the mounting costs from natural disasters like storms, floods, fires and droughts. Question and answer session is expected with both the audience and media.

Like this: