The Federal Reserve is “far from our goals” and tightening policies

Federal Reserve Board Vice-Chair Richard Clarida told CNBC Wednesday that he believes the central bank should maintain its ultra-loose policy as the U.S. economy returns from the turmoil of the pandemic era. ..

“soClosing bell“In an interview, Clarida expects the economy to grow by nearly 7% for the full year, which will be the fastest pace since 1984.

He added: Work conditions continue to improveBut nonetheless, significant progress needs to be made to be able to confidently pull back all the support the Fed has provided since then. COVID-19 Finished the longest expansion in US history.

“We are still far from our goals. With the new framework, we want to not only predict progress, but also see actual progress,” says Clarida.

Last year, as the economy stagnated due to the fight against the virus, the Fed adopted a new strategy of not raising interest rates in response to tight labor markets. Instead, the Fed said it would allow inflation to heat up a bit as long as the long-term average was close to the 2% target.

As the Federal Reserve Board has continued, it has had a significant impact on policy. Keep short-term borrowing rates close to zero We buy at least $ 120 billion in bonds each month. Clarida and his fellow officials said policy would not change in the current situation, even if inflation heats up as expected in the coming months.

“From next year onwards, if there is unexpected and sustained upward pressure on prices that moves inflation to a level that contradicts our mission, we will use tools to lower it,” he said. Said. “I haven’t seen overheating as a baseline. Of course, there are risks in any outlook.”

Treasury Secretary Janet Yellen, who chaired the Fed from 2014 to 2018, said on Tuesday. Higher rate may be needed To prevent the economy from overheating. Comments have attracted attention in the financial markets, as Treasury officials rarely comment on interest rates.

Later that day, she traced these statements back, saying she wasn’t making predictions or trying to advise the Fed. She added that she didn’t think inflation would be a problem and believed that the central bank could act in the event of a problem.

“She showed that she wasn’t predicting policy or giving us advice, and I accept her words about it,” Clarida said.

He said market prices show little risk of runaway inflation and that the current economy carries both upward and downward risks.

As a result, the Fed’s balance sheet approaches $ 8 trillion and the economy Growth Posts Rarely seen since the Great Depression.

“Remember that the shock was very bad and the holes were very deep,” he said. “When there are 8.5 million Americans who didn’t have a job 13 months ago, rapid growth is really welcome.”

Other Fed officials share views

Clarida’s remarks were made during a busy day for Fed speakers.

Central bank officials stuck primarily to the script, as stated through a post-meeting statement and chair last week. Jerome PowellSubsequent remarks His press conference..

They are primarily looking at a rapidly improving economy that will probably be accompanied by some short-term inflationary pressures that will not last. Current policies may continue to be effective unless the situation changes significantly. Expected inflation is expected to rise, primarily due to easy comparisons with last year’s anemia levels and eventually easing supply chain log jams.

Charles Evans, president of the Federal Reserve Bank-Chicago, said he hoped the policy would “become accommodative for some time.” He expects inflation to remain low, largely because expectations that he considers to be a major driver are also silent.

Similarly, Boston Fed President Eric Rosengren said the current policy level was appropriate. However, he warned that “policy makers need to be vigilant” when monitoring wages and prices in response to signs of inflation, primarily improving labor market conditions.

Despite maintaining optimism about inflation, Fed Governor Michelle Bowman said gross domestic product is growing faster than the current Fed’s outlook suggests and unemployment is declining rapidly. He said he thinks. However, she believes inflation will continue to be subdued and that current central bank policies are in place.

“My forecasts carry an upward risk,” said Cleveland Fed President Loretta Mester, but “unless there is clear evidence that inflationary pressure pushes inflation beyond our desired path. I’m hoping that I’ll be patient. “

Become a smarter investor CNBC Pro..
Get stock selection, analyst phone calls, exclusive interviews, and access to CNBCTV.
Sign up and get started Free trial today..

The Federal Reserve is “far from our goals” and tightening policies

Source link The Federal Reserve is “far from our goals” and tightening policies

Back to top button