In his prepared remarks to be delivered at an event in New York, Fed Board of Governors Vice Chair Richard Clarida said that the Fed is prepared to adjust the balance sheet normalization if conditions warrant.
Key quotes (via Reuters)
- The U.S. economy is in a good place.
- U.S. economy is as close to achieving Fed’s dual mandate goals as it has in 20 years.
- If inflation shortfall becomes persistent, Fed would take that into account.
- If global economic and financial developments present a material downside risk, Fed would take that into account.
- Fed’s recent decision that rates are appropriate based on their view that some softness in inflation data will prove transitory.
- Fed must assure policy can sustain maximum employment and price stability ‘for as long as possible’.
- U.S. inflation is ‘muted,’ inflation expectations are ‘stable’.
- Inflation expectations sit at the low end of range consistent with Fed’s mandate.
- Fiscal policy will continue to support U.S. growth this year.
- Lower neutral rates increase likelihood that monetary policy will not provide sufficient accommodation in future downturns.
- Rising wages do not currently signal rising cost-push pressures.
- Lower structural rate of unemployment means labor market may not be as tight or inflationary pressures as strong as one would expect.
- Rise in prime-age labor force participation has restrained inflation, may suggest potential output is higher than many current estimates.
- U.S. is seeing evidence of a pickup in productivity growth.
- Price inflation appears less responsive to resource slack than in the past.
- Price stability requires inflation and inflation expectations near target.
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